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Do hometown connections affect corporate governance? Evidence from Chinese Listed Companies

Author

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  • Xu, Qiuhua
  • Deng, Li
  • Li, Sen
  • Huang, Wen

Abstract

Based on the relational network theory, this paper examines how hometown connections between the chairman of the board and CEO influence accounting information quality in China. Taking A-share listed companies from 2007 to 2016 as the sample, we find that these connections can significantly improve corporations’ accounting information quality, particularly for private enterprises. Moreover, the chairman’s shareholding position, the marketization level of the company’s location and whether the chairman serves in his or her hometown also affect accounting information quality. Specifically, the positive contribution of the fellow relationship between chairman and CEO to accounting information quality is more significant in the case of the chairman holding shares, higher local marketization level and the chairman being local. This paper illustrates the chairman’s role in CEO oversight, enriches and expands the theory and approaches to internal governance.

Suggested Citation

  • Xu, Qiuhua & Deng, Li & Li, Sen & Huang, Wen, 2021. "Do hometown connections affect corporate governance? Evidence from Chinese Listed Companies," International Review of Economics & Finance, Elsevier, vol. 73(C), pages 290-302.
    • Handle: RePEc:eee:reveco:v:73:y:2021:i:c:p:290-302
    DOI: 10.1016/j.iref.2020.12.035
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    2. GuoHua Cao & WenJun Geng & Jing Zhang & Qi Li, 2023. "Social network, financial constraint, and corporate innovation," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 13(3), pages 667-692, September.
    3. Di Wang & Zhanchi Wu & Junjie You & Bangzhu Zhu & Rongwu Zhang, 2023. "Does hometown connection between chairmen and CEOs improve compensation–performance sensitivity in China?," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-12, December.
    4. Murat Ocak & Bekir Emre Kurtulmuş & Emrah Arıoğlu, 2024. "Do Individual Auditors from More Religious Hometowns Enhance Audit Quality? Evidence from an Islamic Country," Journal of Business Ethics, Springer, vol. 190(2), pages 439-481, March.

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    More about this item

    Keywords

    Hometown connections; Chairman of the board; Accounting information quality; State ownership; Corporate governance;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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