Skip to main content
Top
Published in: Review of Quantitative Finance and Accounting 2/2024

15-11-2023

Are directors with foreign experience better monitors? Evidence from investment efficiency

Authors: Xueman Xiang, Carl R. Chen, Yue Liu, Azhar Mughal, Qizhi Tao

Published in: Review of Quantitative Finance and Accounting | Issue 2/2024

Log in

Activate our intelligent search to find suitable subject content or patents.

search-config
loading …

Abstract

Using Chinese listed firms from 2008 to 2018, we find that directors with foreign experience alleviate both overinvestment and underinvestment, hence improve firms’ investment efficiency. The source of efficiency lies in better governance, which arises from the transfer of values and cognition, and advanced management practices across countries as well as greater independence as these directors with foreign experience have fewer local ties. Better governance helps mitigate agency problems and information asymmetry and relax firms’ financial constraints. Supporting this argument, we find that directors with foreign experience are associated with lower controlling shareholders’ tunneling transactions and lower investment—cash flow sensitivity. We further find that the impact of directors’ foreign experience on investment efficiency is more pronounced at firms with weaker corporate governance, less transparent information environment, higher financial constraints, and when foreign experience is gained in countries with better investor protection, superior management practices, better rule of law, and less corruption. Our finding is robust to alternative variable measurements and tests for endogeneity. Overall, this paper highlights the important monitoring role of directors with foreign experience, which promotes firm investment efficiency through various governance channels.

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

  • über 102.000 Bücher
  • über 537 Zeitschriften

aus folgenden Fachgebieten:

  • Automobil + Motoren
  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Elektrotechnik + Elektronik
  • Energie + Nachhaltigkeit
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Maschinenbau + Werkstoffe
  • Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

  • über 67.000 Bücher
  • über 340 Zeitschriften

aus folgenden Fachgebieten:

  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Versicherung + Risiko




Jetzt Wissensvorsprung sichern!

Appendix
Available only for authorised users
Footnotes
1
Currently, most Chinese companies listed and traded on the Shanghai Stock Exchange (SHSE) and Shenzhen Stock Exchange (SZSE) issue two classes of shares: A and B shares. A shares are domestic shares quoted in Chinese currency (RMB) and are restricted to domestic investors and qualified foreign institutional investors (QFIIs). B shares are foreign shares quoted in foreign currencies (U.S. dollars for Shanghai B shares and Hong Kong dollars for Shenzhen B shares). Until February 2001, B shares were available only to foreign investors. B-share companies might be more likely to employ directors with foreign experience and have different investment policies. To avoid the influence of B shares on our research question, our sample covers only A shares.
 
2
CSMAR divides all listed firm into four categories based on their equity nature, including, state-owned enterprises, private enterprises, foreign-owned enterprises and other. Foreign-owned enterprises are those established in China with capital invested by foreign investors, including joint ventures, cooperative enterprises and wholly foreign-owned enterprises, excluding the branches of foreign enterprises or other economic organizations in China. We exclude firms labelled as “Foreign-owned Enterprise” and “Other”. Our sample contains only state-owned firms and private firms.
 
3
ST (special treatment) stocks are stocks with abnormal financial conditions. *ST stocks fail to comply with certain rules imposed by the exchange during the period of being labeled as ST. These stocks are typically in financial difficulty.
 
4
This measurement is equivalent to capital expenditure (COMPUSTAT Item 128#) used by U.S.-based studies.
 
5
This test is motivated by the fact that in the Chinese context, Tobin’s Q may be an imperfect measure of investment opportunities.
 
6
We also use the industry-fixed effect, and our main conclusion does not change. The results are available upon request.
 
7
Because \(Leverage\) and \(Cash\) are used to construct \(Over\,\,Firm\), they are omitted from Eq. (2).
 
8
In this paper, the KZ index is calculated as: \(-9.352\times \left(Cash\,\,Flow/K\right)+\left(0.483\times TQ\right)+4.634\times Leverage-29.912\times \left(Dividends/K\right)-3.079\times \left(Cash/K\right)\).
 
9
This measurement is equivalent to capital expenditure (COMPUSTAT Item 128#) used in U.S.-based studies.
 
10
Thanks for the reviewer’s suggestion of identifying individual firms with changes in board members with foreign experience and use evidence from change analyses to provide stronger evidence. However, to employ this identification approach, we need firstly to identify individual firms with changes in board members with foreign experience and then compare the difference in investment efficiency of treated firm pre- and post-event. As shown in Eq. (1) in the main text, we measure firm’s investment efficiency as the sensitivity of investment expenditure to investment opportunities, which is the coefficient estimate obtained by regressing firm investment expenditure on investment opportunities. Therefore, to measure the investment efficiency of a firm that experiences a change event, we need sufficient number of observations for this specific firm both before and after the changes to make the regression analysis in Eq. (1) meaningful. That is, all firms must have sufficient number of observations during the pre- and post-event periods. However, constrained by our panel data set with data availability fixed to the period of 2008-2018, and some changes occur in the earlier years of the sample period, while others occur in the latter years, estimating investment efficiency for all firms with unequal number of observations (before and after the event) is statistically not feasible. Therefore, we are unable to conduct the change analyses as the reviewer suggested in our empirical framework.
 
Literature
go back to reference Adams RB, Ferreira D (2009) Women in the boardroom and their impact on governance and performance. J Financ Econ 94(2):291–309 CrossRef Adams RB, Ferreira D (2009) Women in the boardroom and their impact on governance and performance. J Financ Econ 94(2):291–309 CrossRef
go back to reference Adams RB, Hermalin BE, Weisbach MS (2010) The role of boards of directors in corporate governance: a conceptual framework and survey. J Econ Lit 48(1):58–107 CrossRef Adams RB, Hermalin BE, Weisbach MS (2010) The role of boards of directors in corporate governance: a conceptual framework and survey. J Econ Lit 48(1):58–107 CrossRef
go back to reference Agrawal A, Knoeber CR (1996) Firm performance and mechanisms to control agency problems between managers and shareholders. J Financ Quant Anal 31(3):377–397 CrossRef Agrawal A, Knoeber CR (1996) Firm performance and mechanisms to control agency problems between managers and shareholders. J Financ Quant Anal 31(3):377–397 CrossRef
go back to reference Aivazian VA, Ge Y, Qiu J (2005) The impact of leverage on firm investment: Canadian evidence. J Corp Financ 11(1):277–291 CrossRef Aivazian VA, Ge Y, Qiu J (2005) The impact of leverage on firm investment: Canadian evidence. J Corp Financ 11(1):277–291 CrossRef
go back to reference Almeida H, Campello M (2007) Financial constraints, asset tangibility, and corporate investment. Rev Financ Stud 20(5):1429–1460 CrossRef Almeida H, Campello M (2007) Financial constraints, asset tangibility, and corporate investment. Rev Financ Stud 20(5):1429–1460 CrossRef
go back to reference Alvarez R, Jara M, Pombo C (2018) Do institutional blockholders influence corporate investment? Evidence from emerging markets. J Corp Financ 53:38–64 CrossRef Alvarez R, Jara M, Pombo C (2018) Do institutional blockholders influence corporate investment? Evidence from emerging markets. J Corp Financ 53:38–64 CrossRef
go back to reference An H, Chen CR, Wu Q, Zhang T (2021) Corporate innovation: Do diverse boards help? J Financ Quant Anal 56(1):155–182 CrossRef An H, Chen CR, Wu Q, Zhang T (2021) Corporate innovation: Do diverse boards help? J Financ Quant Anal 56(1):155–182 CrossRef
go back to reference Baker M, Stein JC, Wurgler J (2003) When does the market matter? Stock prices and the investment of equity-dependent firms. Q J Econ 118(3):969–1005 CrossRef Baker M, Stein JC, Wurgler J (2003) When does the market matter? Stock prices and the investment of equity-dependent firms. Q J Econ 118(3):969–1005 CrossRef
go back to reference Barkan R, Zohar D, Erev I (1998) Accidents and decision making under uncertainty: a comparison of four models. Organ Behav Hum Decis Process 74(2):118–144 CrossRef Barkan R, Zohar D, Erev I (1998) Accidents and decision making under uncertainty: a comparison of four models. Organ Behav Hum Decis Process 74(2):118–144 CrossRef
go back to reference Best RW, Hodges CW, Lin B-X (2004) Does information asymmetry explain the diversification discount? J Financ Res 27(2):235–249 CrossRef Best RW, Hodges CW, Lin B-X (2004) Does information asymmetry explain the diversification discount? J Financ Res 27(2):235–249 CrossRef
go back to reference Bhagwati J, Hamada K (1974) The brain drain, international integration of markets for professionals and unemployment: a theoretical analysis. J Dev Econ 1(1):19–42 CrossRef Bhagwati J, Hamada K (1974) The brain drain, international integration of markets for professionals and unemployment: a theoretical analysis. J Dev Econ 1(1):19–42 CrossRef
go back to reference Biddle GC, Hilary G, Verdi RS (2009) How does financial reporting quality relate to investment efficiency? J Account Econ 48(2):112–131 CrossRef Biddle GC, Hilary G, Verdi RS (2009) How does financial reporting quality relate to investment efficiency? J Account Econ 48(2):112–131 CrossRef
go back to reference Blanchard OJ, Lopez-de-Silanes F, Shleifer A (1994) What do firms do with cash windfalls? J Financ Econ 36(3):337–360 CrossRef Blanchard OJ, Lopez-de-Silanes F, Shleifer A (1994) What do firms do with cash windfalls? J Financ Econ 36(3):337–360 CrossRef
go back to reference Bloom N, Bloom D, Reenen J (2007) Measuring and explaining management practices across firms and countries. Q J Econ 122(4):1351–1408 CrossRef Bloom N, Bloom D, Reenen J (2007) Measuring and explaining management practices across firms and countries. Q J Econ 122(4):1351–1408 CrossRef
go back to reference Bloom N, Genakos C, Sadun R, Van Reenen J (2012) Management practices across firms and countries. Acad Manag Perspect 26(1):12–33 CrossRef Bloom N, Genakos C, Sadun R, Van Reenen J (2012) Management practices across firms and countries. Acad Manag Perspect 26(1):12–33 CrossRef
go back to reference Campbell JL, Dhaliwal DS, Schwartz WC Jr (2012) Financing constraints and the cost of capital: evidence from the funding of corporate pension plans. Rev Financ Stud 25(3):868–912 CrossRef Campbell JL, Dhaliwal DS, Schwartz WC Jr (2012) Financing constraints and the cost of capital: evidence from the funding of corporate pension plans. Rev Financ Stud 25(3):868–912 CrossRef
go back to reference Campello M, Graham JR, Harvey CR (2010) The real effects of financial constraints: evidence from a financial crisis. J Financ Econ 97(3):470–487 CrossRef Campello M, Graham JR, Harvey CR (2010) The real effects of financial constraints: evidence from a financial crisis. J Financ Econ 97(3):470–487 CrossRef
go back to reference Cao F, Sun J, Yuan R (2019) Board directors with foreign experience and stock price crash risk: evidence from China. J Bus Financ Acc 46(9–10):1144–1170 CrossRef Cao F, Sun J, Yuan R (2019) Board directors with foreign experience and stock price crash risk: evidence from China. J Bus Financ Acc 46(9–10):1144–1170 CrossRef
go back to reference Carpenter MA, Sanders WG, Gregersen HB (2001) Bundling human capital with organizational context: the impact of international assignment experience on multinational firm performance and CEO pay. Acad Manag J 44(3):493–511 CrossRef Carpenter MA, Sanders WG, Gregersen HB (2001) Bundling human capital with organizational context: the impact of international assignment experience on multinational firm performance and CEO pay. Acad Manag J 44(3):493–511 CrossRef
go back to reference Chay JB, Chong BU, Im HJ (2023) Dividend taxes and investment efficiency: evidence from the 2003 U.S. personal taxation reform. J Account Econ 75(1):101514 CrossRef Chay JB, Chong BU, Im HJ (2023) Dividend taxes and investment efficiency: evidence from the 2003 U.S. personal taxation reform. J Account Econ 75(1):101514 CrossRef
go back to reference Chen Q, Goldstein I, Jiang W (2007) Price informativeness and investment sensitivity to stock price. Rev Financ Stud 20(3):619–650 CrossRef Chen Q, Goldstein I, Jiang W (2007) Price informativeness and investment sensitivity to stock price. Rev Financ Stud 20(3):619–650 CrossRef
go back to reference Chen S, Sun Z, Tang S, Wu D (2011) Government intervention and investment efficiency: evidence from China. J Corp Financ 17(2):259–271 CrossRef Chen S, Sun Z, Tang S, Wu D (2011) Government intervention and investment efficiency: evidence from China. J Corp Financ 17(2):259–271 CrossRef
go back to reference Chen J, Leung WS, Goergen M (2017a) The impact of board gender composition on dividend payouts. J Corp Finan 43:86–105 CrossRef Chen J, Leung WS, Goergen M (2017a) The impact of board gender composition on dividend payouts. J Corp Finan 43:86–105 CrossRef
go back to reference Chen R, El Ghoul S, Guedhami O, Wang H (2017b) Do state and foreign ownership affect investment efficiency? Evidence from privatizations. J Corp Financ 42:408–421 CrossRef Chen R, El Ghoul S, Guedhami O, Wang H (2017b) Do state and foreign ownership affect investment efficiency? Evidence from privatizations. J Corp Financ 42:408–421 CrossRef
go back to reference Chen T, Xie L, Zhang Y (2017c) How does analysts’ forecast quality relate to corporate investment efficiency? J Corp Finan 43:217–240 CrossRef Chen T, Xie L, Zhang Y (2017c) How does analysts’ forecast quality relate to corporate investment efficiency? J Corp Finan 43:217–240 CrossRef
go back to reference Chen CC, Ho KC, Li HM, Yu MT (2023) Impact of information disclosure ratings on investment efficiency: evidence from China. Rev Quant Financ Account 60(2):471–500 CrossRef Chen CC, Ho KC, Li HM, Yu MT (2023) Impact of information disclosure ratings on investment efficiency: evidence from China. Rev Quant Financ Account 60(2):471–500 CrossRef
go back to reference Cheng M, Dhaliwal D, Zhang Y (2013) Does investment efficiency improve after the disclosure of material weaknesses in internal control over financial reporting? J Account Econ 56(1):1–18 CrossRef Cheng M, Dhaliwal D, Zhang Y (2013) Does investment efficiency improve after the disclosure of material weaknesses in internal control over financial reporting? J Account Econ 56(1):1–18 CrossRef
go back to reference Cheung Y-L, Rau PR, Stouraitis A (2006) Tunneling, propping, and expropriation: evidence from connected party transactions in Hong Kong. J Financ Econ 82(2):343–386 CrossRef Cheung Y-L, Rau PR, Stouraitis A (2006) Tunneling, propping, and expropriation: evidence from connected party transactions in Hong Kong. J Financ Econ 82(2):343–386 CrossRef
go back to reference Claessens S, Djankov S, Fan JPH, Lang LHP (2002) Disentangling the incentive and entrenchment effects of large shareholdings. J Financ 57(6):2741–2771 CrossRef Claessens S, Djankov S, Fan JPH, Lang LHP (2002) Disentangling the incentive and entrenchment effects of large shareholdings. J Financ 57(6):2741–2771 CrossRef
go back to reference Cleary S (1999) The relationship between firm investment and financial status. J Financ 54(2):673–692 CrossRef Cleary S (1999) The relationship between firm investment and financial status. J Financ 54(2):673–692 CrossRef
go back to reference Cull R, Li W, Sun B, Xu LC (2015) Government connections and financial constraints: Evidence from a large representative sample of Chinese firms. J Corp Finan 32:271–294 CrossRef Cull R, Li W, Sun B, Xu LC (2015) Government connections and financial constraints: Evidence from a large representative sample of Chinese firms. J Corp Finan 32:271–294 CrossRef
go back to reference Cummins J, Hassett K, Oliner S (2006) Investment behavior, observable expectations, and internal funds. Am Econ Rev 96(3):796–810 CrossRef Cummins J, Hassett K, Oliner S (2006) Investment behavior, observable expectations, and internal funds. Am Econ Rev 96(3):796–810 CrossRef
go back to reference Dai Y, Kong D, Liu S (2018) Returnee talent and corporate investment: evidence from China. Eur Account Rev 27(2):313–337 CrossRef Dai Y, Kong D, Liu S (2018) Returnee talent and corporate investment: evidence from China. Eur Account Rev 27(2):313–337 CrossRef
go back to reference Easton PD (2004) PE ratios, PEG ratios, and estimating the implied expected rate of return on equity capital. Account Rev 79(1):73–95 CrossRef Easton PD (2004) PE ratios, PEG ratios, and estimating the implied expected rate of return on equity capital. Account Rev 79(1):73–95 CrossRef
go back to reference Faccio M, Lang LHP (2002) The ultimate ownership of western European corporations. J Financ Econ 65(3):365–395 CrossRef Faccio M, Lang LHP (2002) The ultimate ownership of western European corporations. J Financ Econ 65(3):365–395 CrossRef
go back to reference Fama EF, Jensen MC (1983) Agency problems and residual claims. J Law Econ 26(2):327–349 CrossRef Fama EF, Jensen MC (1983) Agency problems and residual claims. J Law Econ 26(2):327–349 CrossRef
go back to reference Fazzari SM, Hubbard RG, Petersen BC (1988) Finance constraints and corporate investment. Brook Pap Econ Act 19(1):141–206 CrossRef Fazzari SM, Hubbard RG, Petersen BC (1988) Finance constraints and corporate investment. Brook Pap Econ Act 19(1):141–206 CrossRef
go back to reference Feng X, Johansson AC (2018) Living through the Great Chinese Famine: early-life experiences and managerial decisions. J Corp Financ 48:638–657 CrossRef Feng X, Johansson AC (2018) Living through the Great Chinese Famine: early-life experiences and managerial decisions. J Corp Financ 48:638–657 CrossRef
go back to reference Firth M, Lin C, Wong SML (2008) Leverage and investment under a state-owned bank lending environment: EVIDENCE from China. J Corp Financ 14(5):642–653 CrossRef Firth M, Lin C, Wong SML (2008) Leverage and investment under a state-owned bank lending environment: EVIDENCE from China. J Corp Financ 14(5):642–653 CrossRef
go back to reference Giannetti M, Liao G, Yu X (2015) The Brain gain of corporate boards: evidence from China. J Financ 70(4):1629–1682 CrossRef Giannetti M, Liao G, Yu X (2015) The Brain gain of corporate boards: evidence from China. J Financ 70(4):1629–1682 CrossRef
go back to reference Griffin D, Li K, Xu T (2021) Board gender diversity and corporate innovation: International evidence. J Financ Quant Anal 56(1):123–154 CrossRef Griffin D, Li K, Xu T (2021) Board gender diversity and corporate innovation: International evidence. J Financ Quant Anal 56(1):123–154 CrossRef
go back to reference Guariglia A, Yang J (2016) A balancing act: managing financial constraints and agency costs to minimize investment inefficiency in the Chinese market. J Corp Financ 36:111–130 CrossRef Guariglia A, Yang J (2016) A balancing act: managing financial constraints and agency costs to minimize investment inefficiency in the Chinese market. J Corp Financ 36:111–130 CrossRef
go back to reference Gul FA, Kim J-B, Qiu AA (2010) Ownership concentration, foreign shareholding, audit quality, and stock price synchronicity: evidence from China. J Financ Econ 95(3):425–442 CrossRef Gul FA, Kim J-B, Qiu AA (2010) Ownership concentration, foreign shareholding, audit quality, and stock price synchronicity: evidence from China. J Financ Econ 95(3):425–442 CrossRef
go back to reference Gul FA, Srinidhi B, Ng AC (2011) Does board gender diversity improve the informativeness of stock prices? J Account Econ 51:314–338 CrossRef Gul FA, Srinidhi B, Ng AC (2011) Does board gender diversity improve the informativeness of stock prices? J Account Econ 51:314–338 CrossRef
go back to reference Hadlock C, Pierce J (2010) New evidence on measuring financial constraints: moving beyond the KZ index. Rev Financ Stud 23(5):1909–1940 CrossRef Hadlock C, Pierce J (2010) New evidence on measuring financial constraints: moving beyond the KZ index. Rev Financ Stud 23(5):1909–1940 CrossRef
go back to reference Hambrick D (2007) Upper echelons theory: an update. Acad Manag Rev 32(2):334–343 CrossRef Hambrick D (2007) Upper echelons theory: an update. Acad Manag Rev 32(2):334–343 CrossRef
go back to reference Harford J (1999) Corporate cash reserves and acquisitions. J Financ 54(6):1969–1997 CrossRef Harford J (1999) Corporate cash reserves and acquisitions. J Financ 54(6):1969–1997 CrossRef
go back to reference Heckman JJ (1979) Sample selection bias as a specification error. Econometrica 47(1):153–161 CrossRef Heckman JJ (1979) Sample selection bias as a specification error. Econometrica 47(1):153–161 CrossRef
go back to reference Hermalin BE, Weisbach MS (1991) The effects of board composition and direct incentives on firm performance. Financ Manag 20(4):101–112 CrossRef Hermalin BE, Weisbach MS (1991) The effects of board composition and direct incentives on firm performance. Financ Manag 20(4):101–112 CrossRef
go back to reference Hermalin BE, Weisbach MS (1998) Endogenously chosen boards of directors and their monitoring of the CEO. Econ Policy Rev Fed Reserve Bank N Y 9(1):7–26 Hermalin BE, Weisbach MS (1998) Endogenously chosen boards of directors and their monitoring of the CEO. Econ Policy Rev Fed Reserve Bank N Y 9(1):7–26
go back to reference Hermalin BE, Weisbach MS (2003) Boards of directors as an endogenously determined institution: a survey of the economic literature. Econ Policy Rev Fed Reserve Bank N Y 9(4):7–26 Hermalin BE, Weisbach MS (2003) Boards of directors as an endogenously determined institution: a survey of the economic literature. Econ Policy Rev Fed Reserve Bank N Y 9(4):7–26
go back to reference Hertwig R, Erev I (2009) The description–experience gap in risky choice. Trends Cogn Sci 13(12):517–523 CrossRef Hertwig R, Erev I (2009) The description–experience gap in risky choice. Trends Cogn Sci 13(12):517–523 CrossRef
go back to reference Hertwig R, Barron G, Weber E, Erev I (2004) Decisions from experience and the effect of rare events in risky choice. Psychol Sci 15(8):534–539 CrossRef Hertwig R, Barron G, Weber E, Erev I (2004) Decisions from experience and the effect of rare events in risky choice. Psychol Sci 15(8):534–539 CrossRef
go back to reference Hu C, Liu Y-J (2015) Valuing diversity: CEOs’ career experiences and corporate investment. J Corp Financ 30:11–31 CrossRef Hu C, Liu Y-J (2015) Valuing diversity: CEOs’ career experiences and corporate investment. J Corp Financ 30:11–31 CrossRef
go back to reference Hubbard RG (1998) Capital-market imperfections and investment. J Econ Lit 36(1):193–225 Hubbard RG (1998) Capital-market imperfections and investment. J Econ Lit 36(1):193–225
go back to reference Iliev P, Roth L (2018) Learning from directors’ foreign board experiences. J Corp Financ 51:1–19 CrossRef Iliev P, Roth L (2018) Learning from directors’ foreign board experiences. J Corp Financ 51:1–19 CrossRef
go back to reference Javakhadze D, Ferris SP, French DW (2016) Social capital, investments, and external financing. J Corp Financ 37:38–55 CrossRef Javakhadze D, Ferris SP, French DW (2016) Social capital, investments, and external financing. J Corp Financ 37:38–55 CrossRef
go back to reference Jensen MC (1986) Agency costs of free cash flow, corporate finance, and takeovers. Am Econ Rev 76(2):323–329 Jensen MC (1986) Agency costs of free cash flow, corporate finance, and takeovers. Am Econ Rev 76(2):323–329
go back to reference Jensen MC (1993) The modern industrial revolution, exit, and the failure of internal control systems. J Financ 48(3):831–880 CrossRef Jensen MC (1993) The modern industrial revolution, exit, and the failure of internal control systems. J Financ 48(3):831–880 CrossRef
go back to reference Jensen MC, Meckling WH (1976) Theory of the firm: managerial behavior, agency costs and ownership structure. J Financ Econ 3(4):305–360 CrossRef Jensen MC, Meckling WH (1976) Theory of the firm: managerial behavior, agency costs and ownership structure. J Financ Econ 3(4):305–360 CrossRef
go back to reference Jiang G, Lee CMC, Yue H (2010) Tunneling through intercorporate loans: the China experience. J Financ Econ 98(1):1–20 CrossRef Jiang G, Lee CMC, Yue H (2010) Tunneling through intercorporate loans: the China experience. J Financ Econ 98(1):1–20 CrossRef
go back to reference Jiang L, Kim J-B, Pang L (2011) Control-ownership wedge and investment sensitivity to stock price. J Bank Finance 35(11):2856–2867 CrossRef Jiang L, Kim J-B, Pang L (2011) Control-ownership wedge and investment sensitivity to stock price. J Bank Finance 35(11):2856–2867 CrossRef
go back to reference Jiang F, Cai W, Wang X, Zhu B (2018) Multiple large shareholders and corporate investment: evidence from China. J Corp Financ 50:66–83 CrossRef Jiang F, Cai W, Wang X, Zhu B (2018) Multiple large shareholders and corporate investment: evidence from China. J Corp Financ 50:66–83 CrossRef
go back to reference Kang S, Kim EH, Lu Y (2018) Does independent directors’ CEO experience matter? Rev Finance 22(3):905–949 CrossRef Kang S, Kim EH, Lu Y (2018) Does independent directors’ CEO experience matter? Rev Finance 22(3):905–949 CrossRef
go back to reference Kaplan SN, Zingales L (1997) Do financing constraints explain why investment is correlated with cash flow? Q J Econ 112:168–216 CrossRef Kaplan SN, Zingales L (1997) Do financing constraints explain why investment is correlated with cash flow? Q J Econ 112:168–216 CrossRef
go back to reference Kerr W (2008) Ethnic scientific communities and international technology diffusion. Rev Econ Stat 90(3):518–537 CrossRef Kerr W (2008) Ethnic scientific communities and international technology diffusion. Rev Econ Stat 90(3):518–537 CrossRef
go back to reference La Porta R, Lopez-de-Silane F, Shleifer A, Vishny RW (1998) Law and finance. J Polit Econ 106(6):1113–1155 CrossRef La Porta R, Lopez-de-Silane F, Shleifer A, Vishny RW (1998) Law and finance. J Polit Econ 106(6):1113–1155 CrossRef
go back to reference Laeven L, Levine R (2009) Bank governance, regulation and risk taking. J Financ Econ 93(2):259–275 CrossRef Laeven L, Levine R (2009) Bank governance, regulation and risk taking. J Financ Econ 93(2):259–275 CrossRef
go back to reference Lamont O, Polk C, Saa-Requejo J (2001) Financial constraints and stock returns. Rev Financ Stud 14(2):529–554 CrossRef Lamont O, Polk C, Saa-Requejo J (2001) Financial constraints and stock returns. Rev Financ Stud 14(2):529–554 CrossRef
go back to reference Liu Q, Lu Z (2007) Corporate governance and earnings management in the Chinese listed companies: a tunneling perspective. J Corp Financ 13(5):881–906 CrossRef Liu Q, Lu Z (2007) Corporate governance and earnings management in the Chinese listed companies: a tunneling perspective. J Corp Financ 13(5):881–906 CrossRef
go back to reference Marquis C, Tilcsik A (2013) Imprinting: toward a multilevel theory. Acad Manag Ann 7(1):195–245 CrossRef Marquis C, Tilcsik A (2013) Imprinting: toward a multilevel theory. Acad Manag Ann 7(1):195–245 CrossRef
go back to reference McLean RD, Zhang T, Zhao M (2012) Why does the law matter? Investor protection and its effects on investment, finance, and growth. J Financ 67(1):313–350 CrossRef McLean RD, Zhang T, Zhao M (2012) Why does the law matter? Investor protection and its effects on investment, finance, and growth. J Financ 67(1):313–350 CrossRef
go back to reference Miletkov M, Poulsen A, Wintoki MB (2017) Foreign independent directors and the quality of legal institutions. J Int Bus Stud 48(2):267–292 CrossRef Miletkov M, Poulsen A, Wintoki MB (2017) Foreign independent directors and the quality of legal institutions. J Int Bus Stud 48(2):267–292 CrossRef
go back to reference Modigliani F, Miller MH (1958) The cost of capital, corporation finance and the theory of investment. Am Econ Rev 48(3):261–297 Modigliani F, Miller MH (1958) The cost of capital, corporation finance and the theory of investment. Am Econ Rev 48(3):261–297
go back to reference Myers SC (1977) Determinants of corporate borrowing. J Financ Econ 5(2):147–175 CrossRef Myers SC (1977) Determinants of corporate borrowing. J Financ Econ 5(2):147–175 CrossRef
go back to reference Opler T, Pinkowitz L, Stulz R, Williamson R (1999) The determinants and implications of corporate cash holdings. J Financ Econ 52(1):3–46 CrossRef Opler T, Pinkowitz L, Stulz R, Williamson R (1999) The determinants and implications of corporate cash holdings. J Financ Econ 52(1):3–46 CrossRef
go back to reference Paligorova T, Xu Z (2012) Complex ownership and capital structure. J Corp Finan 18(4):701–716 CrossRef Paligorova T, Xu Z (2012) Complex ownership and capital structure. J Corp Finan 18(4):701–716 CrossRef
go back to reference Petersen MA (2009) Estimating standard errors in finance panel data sets: comparing approaches. Rev Financ Stud 22(1):435–480 CrossRef Petersen MA (2009) Estimating standard errors in finance panel data sets: comparing approaches. Rev Financ Stud 22(1):435–480 CrossRef
go back to reference Quan X, Ke Y, Qian Y, Zhang Y (2023) CEO foreign experience and green innovation: evidence from China. J Bus Ethics 182(2):535–557 CrossRef Quan X, Ke Y, Qian Y, Zhang Y (2023) CEO foreign experience and green innovation: evidence from China. J Bus Ethics 182(2):535–557 CrossRef
go back to reference Rediker KJ, Seth A (1995) Boards of directors and substitution effects of alternative governance mechanisms. Strateg Manag J 16(2):85–99 CrossRef Rediker KJ, Seth A (1995) Boards of directors and substitution effects of alternative governance mechanisms. Strateg Manag J 16(2):85–99 CrossRef
go back to reference Richardson S (2006) Over-investment of free cash flow. Rev Acc Stud 11(2–3):159–189 CrossRef Richardson S (2006) Over-investment of free cash flow. Rev Acc Stud 11(2–3):159–189 CrossRef
go back to reference Setia-Atmaja L, Haman J, Tanewski G (2011) The role of board independence in mitigating agency problem II in Australian family firms. Br Account Rev 43(3):230–246 CrossRef Setia-Atmaja L, Haman J, Tanewski G (2011) The role of board independence in mitigating agency problem II in Australian family firms. Br Account Rev 43(3):230–246 CrossRef
go back to reference Slater DJ, Dixon-Fowler HR (2009) CEO international assignment experience and corporate social performance. J Bus Ethics 89(3):473–489 CrossRef Slater DJ, Dixon-Fowler HR (2009) CEO international assignment experience and corporate social performance. J Bus Ethics 89(3):473–489 CrossRef
go back to reference Stiglitz JE, Weiss A (1981) Credit rationing in markets with imperfect information. Am Econ Rev 71(3):393–410 Stiglitz JE, Weiss A (1981) Credit rationing in markets with imperfect information. Am Econ Rev 71(3):393–410
go back to reference Stulz R (1990) Managerial discretion and optimal financing policies. J Financ Econ 26(1):3–27 CrossRef Stulz R (1990) Managerial discretion and optimal financing policies. J Financ Econ 26(1):3–27 CrossRef
go back to reference Suutari V, Mäkelä K (2007) The career capital of managers with global careers. J Manag Psychol 22(7):628–648 CrossRef Suutari V, Mäkelä K (2007) The career capital of managers with global careers. J Manag Psychol 22(7):628–648 CrossRef
go back to reference Tao Q, Wei KCJ, Xiang X, Yi B (2022) Board directors’ foreign experience and firm dividend payouts. J Corp Financ 75:102237 CrossRef Tao Q, Wei KCJ, Xiang X, Yi B (2022) Board directors’ foreign experience and firm dividend payouts. J Corp Financ 75:102237 CrossRef
go back to reference To TY, Navone M, Wu E (2018) Analyst coverage and the quality of corporate investment decisions. J Corp Financ 51:164–181 CrossRef To TY, Navone M, Wu E (2018) Analyst coverage and the quality of corporate investment decisions. J Corp Financ 51:164–181 CrossRef
go back to reference Tobin J (1969) A general equilibrium approach to monetary theory. J Money Credit Bank 1(1):15–29 CrossRef Tobin J (1969) A general equilibrium approach to monetary theory. J Money Credit Bank 1(1):15–29 CrossRef
go back to reference Wang H, Luo T, Tian GG, Yan H (2020) How does bank ownership affect firm investment? Evidence from China. J Bank Finance 113:105741 CrossRef Wang H, Luo T, Tian GG, Yan H (2020) How does bank ownership affect firm investment? Evidence from China. J Bank Finance 113:105741 CrossRef
go back to reference Whited TM (1992) Debt, liquidity constraints, and corporate investment: evidence from panel data. J Financ 47(4):1425–1460 CrossRef Whited TM (1992) Debt, liquidity constraints, and corporate investment: evidence from panel data. J Financ 47(4):1425–1460 CrossRef
go back to reference Whited TM, Wu G (2006) Financial constraints risk. Rev Financ Stud 19(2):531–559 CrossRef Whited TM, Wu G (2006) Financial constraints risk. Rev Financ Stud 19(2):531–559 CrossRef
go back to reference Xie H, Ding L, Liao K (2019) Overseas background directors and debt costs—evidence from the mediating effect of the advisory and supervisory functions. Bus Rev 31(11):202–211 ( in Chinese) Xie H, Ding L, Liao K (2019) Overseas background directors and debt costs—evidence from the mediating effect of the advisory and supervisory functions. Bus Rev 31(11):202–211 ( in Chinese)
go back to reference Yuan R, Wen W (2018) Managerial foreign experience and corporate innovation. J Corp Financ 48:752–770 CrossRef Yuan R, Wen W (2018) Managerial foreign experience and corporate innovation. J Corp Financ 48:752–770 CrossRef
go back to reference Zhang J, Kong D, Wu J (2018) Doing good business by hiring directors with foreign experience. J Bus Ethics 153(3):859–876 CrossRef Zhang J, Kong D, Wu J (2018) Doing good business by hiring directors with foreign experience. J Bus Ethics 153(3):859–876 CrossRef
Metadata
Title
Are directors with foreign experience better monitors? Evidence from investment efficiency
Authors
Xueman Xiang
Carl R. Chen
Yue Liu
Azhar Mughal
Qizhi Tao
Publication date
15-11-2023
Publisher
Springer US
Published in
Review of Quantitative Finance and Accounting / Issue 2/2024
Print ISSN: 0924-865X
Electronic ISSN: 1573-7179
DOI
https://doi.org/10.1007/s11156-023-01221-9

Other articles of this Issue 2/2024

Review of Quantitative Finance and Accounting 2/2024 Go to the issue