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Cultural similarity of non-local independent directors and financial reporting quality

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  • Zeng, Yanni
  • Liu, Mengna
  • Ding, Ashley
  • Xu, Rui
  • Zhang, Hao

Abstract

By manually collecting data on the birthplaces of independent directors of Chinese A-share listed companies from 2005 to 2019, we construct a cultural similarity index for non-local independent directors according to the dialect data and empirically test its impact on the financial reporting quality of listed companies. The results show that an increase in the cultural similarity of non-local independent directors is conducive to improving the financial reporting quality of the listed companies in which they serve. The mechanism analysis shows that cultural similarity can improve financial reporting quality by improving internal control quality and information disclosure quality. Our heterogeneity analysis shows that this effect is more pronounced when the listed company has a better external monitoring environment, the company is a non-state-owned enterprise, and the company is located in a region with a high degree of marketization. In addition, the robustness test results show that our conclusion is robust.

Suggested Citation

  • Zeng, Yanni & Liu, Mengna & Ding, Ashley & Xu, Rui & Zhang, Hao, 2023. "Cultural similarity of non-local independent directors and financial reporting quality," International Review of Financial Analysis, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:finana:v:90:y:2023:i:c:s1057521923004349
    DOI: 10.1016/j.irfa.2023.102918
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    More about this item

    Keywords

    Cultural similarity; Non-local independent directors; Financial reporting quality; Dialect;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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