Courtesy calls for reciprocity: Appointment of uncertificated independent directors in China. (22nd February 2021)

• Record Type: Journal Article
• Authors: Li, Yanlin; Liu, Jiawei; Tian, Gary Gang; Wang, Xin
• Is Part Of: Corporate governance. Volume 29:Number 4(2021)
• Page Start: 352
• Page End: 380
• Publication Date: 2021-02-22
• Subjects: Corporate governance -- board appointment -- board voting -- qualification test -- rookie independent directors; Corporate governance -- Periodicals; 658.1145
• DOI: 10.1111/corg.12366
• Languages: English
• ISSNs: 0964-8410

Abstract

Abstract: Research Question/Issue: Using regulatory qualification requirements for being an independent director in China, we examine the effect of explicit norms of reciprocity between uncertificated independent directors (UIDs), who are not qualified at the beginning of their appointment, and insiders. Research Findings/Insights: We find that UIDs are less likely to cast dissenting votes after their appointment, especially after they are qualified, and that firms with UIDs exhibit more expropriation and information opacity. Our main results are robust to alternative explanations and endogeneity tests. Theoretical/Academic Implications: Our study contributes to the literature on reciprocity theory by presenting a new reciprocity norm under the rules of ID qualification and documenting that independent directors who highly value board appointment reciprocate with less independence. Practitioner/Policy Implications: This study offers insights to policy makers regarding how to effectively establish and enhance regulations for qualification for independent directors throughout the world.