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Independent directors, information costs and foreign ownership in Chinese companies

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  • Meng, Yijun
  • Clements, Michael P.
  • Padgett, Carol

Abstract

This paper takes advantage of recent regulatory changes to estimate the effects of independent directors on company performance, taking into account information cost. Our data sample consists of 2371 firm–year observations for China over the period 1999–2005. Independent directors have a significantly negative impact on return on assets (ROA) and earnings per share (EPS), and this negative effect is more pronounced when the ability of the directors to perform their monitoring and advisory activities is curtailed by high information costs. We also find that foreign ownership may contribute to an increased willingness of firms to appoint independent directors.

Suggested Citation

  • Meng, Yijun & Clements, Michael P. & Padgett, Carol, 2018. "Independent directors, information costs and foreign ownership in Chinese companies," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 53(C), pages 139-157.
    • Handle: RePEc:eee:intfin:v:53:y:2018:i:c:p:139-157
    DOI: 10.1016/j.intfin.2017.09.016
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    More about this item

    Keywords

    Corporate governance; Independent directors; Information costs; Foreign ownership; Emerging market;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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