Why do firms appoint expired independent directors? How do expired independent directors affect corporate governance and thus impact investment decisions? By taking advantage of the sharp increase in expired independent directors’ re-employment in China caused by exogenous regulatory shocks, Rule No. 18 and Regulation 11, this paper adopts a PSM-DID design to test the impact of expired independent directors on CSR performance. We find that firms experience a significant decrease in CSR performance after re-hiring expired independent directors and the effect is stronger for CSR components mostly related to internal governance. The results of robustness tests show that the main results are robust to alternative measures of CSR performance, an extended sample period, alternative control groups, year-by-year PSM method, and a staggered DID model regarding Rule No. 18 as a staggered quasi-natural experiment. We address the endogeneity concern that chance drives our DID results by using exogenous regulatory shock, an instrumental variable (the index of regional guanxi culture), and placebo tests. We also find that the negative relation between the re-employment of expired independent directors and CSR performance is more significant for independent directors who have more relations with CEOs and raise less objection to managers’ decisions, and for firms that rely more on expired independent directors’ monitoring roles (e.g., a lower proportion of independent directors, CEO duality, high growth opportunities, and above-median FCF). The mediating-effect test shows that the re-employment of expired independent directors increases CEOs’ myopia and thus reduces CSR performance. In addition, we exclude the alternative explanation that the negative relation is caused by the protective effect brought by expired independent directors’ political backgrounds. Our study shows that managers may build reciprocal relationships with expired independent directors in the Chinese guanxi culture and gain personal interest.

Purpose – This study aims to investigate whether firms purchase directors’ and officers’ liability (D&O) insurance when the country-level economic policy uncertainty (EPU) is high. Design/methodology/approach – This study uses D&O insurance data from Chinese listed firms between 2003 and 2019 to conduct regression analyses to examine the association between D&O insurance and EPU. Findings – The results show that government EPU, despite being an exogenous factor, increases the likelihood of firms’ purchasing D&O insurance, and this effect is more pronounced when firms are exposed to great share price crash risk and high litigation risk, suggesting that firms intend to purchase D&O insurance possibly due to the accentuated stock price crash risk and litigation risk associated with EPU. In addition, the results indicate that the effect of EPU on the D&O insurance purchase decision is moderated by the provincial capital market development and internal control quality. Practical implications – The study highlights the role of uncertain economic policies in shareholder approval of D&O insurance purchases. Originality/value – The study enriches the literature on the determinants of D&O insurance purchases by documenting novel evidence that country-level EPU is a key institutional factor shaping firms’ decisions to purchase D&O insurance.

Starting from the change in decision-makers’ risk attitude, which suggests “an increase in risk leads to a heightened tendency for risk aversion”, this study explores the nonlinear relationship between idiosyncratic risk and corporate cash holdings. Empirical analysis results indicate that, with the enhancement of decision-makers’ risk-averse degree, the marginal increase in corporate cash holdings presents an upward trend as idiosyncratic risk rises. Associated with the changes in managers’ risk attitude, the nonlinear relationship between idiosyncratic risk and corporate cash holdings becomes insignificant when the firm purchases directors’ liability insurance or is located in regions with better business environments. However, if the executives are older or hold academic titles, the increase in corporate cash holdings with the rise of idiosyncratic risk is more rapid.

We incorporate econometrics approach into panel data methods to examine the impact of the board competence on the performance in Chinese banks. By investigating the biographical background of directors in the 20 largest banks during the period 2008 to 2016, our estimate shows that the board of directors play a prominent role in the performance. Especially, both the education background and the management experience have negative impact on the performance.

This study provides the first empirical evidence on the relationship between the chairman of the board of directors (COB) and corporate financial performance. Using a sample of Chinese A listed firms between 2008-2017, we find reliable evidence that the COB turnover improves corporate financial performance. Moreover, the existence of a majority shareholder (Majority) positively influences corporate financial performance, while firm nature (private majority shareholder or public majority shareholder)(Private) may not.

Purpose – This study aims to examine whether and how gender diversity on corporate boards is associated with voluntary nonfinancial disclosures, particularly water disclosures. Design/methodology/approach – This study uses corporate water information disclosure data from Chinese listed firms between 2010 and 2018 to conductregression analyses to examine the association between female directors and water information disclosure. Findings – Empirical results show that female directors have a significantly positive association with corporate water information disclosure. Additionally, internal industry water sensitivity of firms moderates this significant relationship. Originality/value – This study determined that female directors can promote not only water disclosure but also positive corporate water performance, reflecting the consistency of words and deeds of female directors in voluntary nonfinancial disclosures.

This study investigates the relationship between ESG (environmental, social, and governance) ratings and labor share at the firm level. Using data from Chinese A-share listed firms from 2011 to 2021, we find a significantly positive relationship between the two. Furthermore, we document that state-owned enterprises do not demonstrate a strong sense of political and social responsibility in their employee recruitment projects, while companies with high ESG ratings in East China could increase their labor share due to less stringent financial constraints. Finally, the employment-creation effect of ESG ratings is one of the important channels for improving labor share. Considering the increasing awareness of ESG concepts and the boom in ESG investing, our findings hold significant relevance for employees, directors, investors, and public policymakers.

This study investigates the relationship between directors’ foreign experience and corporate environmental disclosure in Chinese listed firms from 2009 to 2017. The research shows that directors with foreign experience have a positive and significant impact on corporate environmental disclosure. This effect is more pronounced in nonstate-owned enterprises, where directors have greater influence over managerial decisions. Additionally, the study suggests that in industries with high energy consumption, high pollution, or overcapacity, the positive effect can be further enhanced by having at least three directors with foreign experience or foreign experience members in the audit committee. The impact of experiential diversity on environmental disclosure is greater than that of board gender and independence diversity. The findings suggest that policymakers and firms prioritize the recruitment of directors with diverse experiences to improve their environmental disclosure practices.

We analyze the relationship between insider trading density and the future stock returns in Chinese listed companies. We introduce a new aspect of the trading pattern, insider trading density, to investigate the information advantage held by insiders. Insiders who trade at a low density during their tenure are less likely to be expected to trade than high trading density insiders. The expectedness of trading patterns reflects insiders’ trading incentives and conveys valuable information to predict future stock prices. Controlling for company, deal, and insider-specific characteristics, we find that low trading density insiders earn higher excess returns than high trading density insiders in a portfolio mimicking long strong purchases and short strong sales. In addition, we show that the insider’s position is a source of information advantage: prominent officers such as CEOs and CFOs are more likely to be low trading density insiders, while non-executive directors and supervisors are more likely to be high trading density insiders.

We examine the economics of independent directors’ resignation decisions by taking advantage of a natural setting: The revised Securities Law of the People’s Republic of China, which took effect on March 1, 2020 (hereafter New Securities Law or NSL), and the first successful class-action securities lawsuit on November 12, 2021. We argue that by increasing 18-fold the penalties to directors of firmsthat misreport, NSL reduces by the same factor the maximum probability of getting caught at which director positions remain economically viable. We predict and find that in the short run when director compensation is fixed, NSL leads to more frequent voluntary resignations, particularly in firms that have a higher ex-ante likelihood of financial misreporting, and in firms where director compensation is lower. We also find that independent director dissent that arises primarily as a result of directors’ inability to establish whether their firms’ financial reports are reliable is a significant antecedent to voluntary resignations post NSL. Finally, analyzing the fraction of Chinese publicly traded firms that purchase director and officer liability (D&O) insurance, we find that independent directors are less likely to resign pre NSL but more likely to resign post NSL. Thisfinding suggeststhat firms with higher misreporting risk self-select pre NSL into such contracts. Given directors’ valuable monitoring role, we expect to observe in the long run both increased independent director compensation and increased D&O insurance coverage.