Do board reforms in parent firms boost subsidiaries’ innovation?

Huang, Hua; Tao, Yunqing; Wang, Xueping; Chen, Feng; Ye, Yongwei

doi:10.1016/j.econmod.2023.106359

Cited by 2 publications

(4 citation statements)

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“…Of particular relevance to our study, corporate governance reforms are associated with an increase in corporate transparency and a reduction in monitoring costs (Armstrong et al, 2014;Florou and Kosi, 2015;Koirala et al, 2020;Chiu et al, 2023;Liao et al, 2023). Furthermore, these reforms are shown to affect other firm-level outcomes, such as acquisitions (Kim and Lu, 2013), firm value (Fauver et al, 2017), stock price crash risk (Hu et al, 2020), and innovation (Huang et al, 2023b).…”

Section: Corporate Governance Reformsmentioning

confidence: 87%

“…, 2023). Furthermore, these reforms are shown to affect other firm-level outcomes, such as acquisitions (Kim and Lu, 2013), firm value (Fauver et al ., 2017), stock price crash risk (Hu et al ., 2020), and innovation (Huang et al ., 2023b).…”

Section: Related Literature and Hypothesesmentioning

confidence: 99%

“…Liao et al (2022) find evidence suggesting that firms tend to have greater incentives to cross-list their securities in foreign countries after the implementation of corporate governance reform in their home countries. Huang et al (2023b) establish a causal effect of board reforms in parent firms on subsidiaries' innovation. As such, our finding that firms are more likely to access public debt after the implementation of major corporate governance reforms in their home countries suggests an important and additional channel through which corporate governance reforms increase firm value.…”

Section: Introductionmentioning

confidence: 96%

“…(2022) find evidence suggesting that firms tend to have greater incentives to cross-list their securities in foreign countries after the implementation of corporate governance reform in their home countries. Huang et al. (2023b) establish a causal effect of board reforms in parent firms on subsidiaries' innovation.…”

Section: Introductionmentioning

confidence: 96%

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Board reforms and the choice of debt: international evidence

Xiao,

Tsang

2024

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PurposeThe authors examine how the major board reforms recently implemented by countries around the world affect firms' choice of debt.Design/methodology/approachUsing a quasi-experimental setting of major board reforms around the world that aim to improve board-related governance practices in various areas, this study investigates the impact of effective board monitoring on corporate debt choice. The authors employ difference-in-differences-type quasi-natural experiment method and path analysis for hypotheses testing.FindingsThe authors find that the implementation of board reforms is positively associated with firms' preference for public debt financing over bank debt. However, this effect tends to weaken after the fourth year following the implementation of board reforms. In additional analyses, the authors find that “rule-based” reforms have a more pronounced effect on firms' choice of debt than do “comply-or-explain” reforms. Both (1) strengthened firm-level internal governance practices that address concerns about the agency cost of debt and (2) reduced information asymmetries play important roles in facilitating firms' debt choice, but the evidence suggests that the former is the economic mechanism through which country-level reforms affect corporate debt choice.Research limitations/implicationsThe study extends the literature examining the heterogeneity of corporate debt choices in a global setting and the literature on the consequences of corporate governance reforms.Practical implicationsThe findings demonstrate the effectiveness of the corporate board reforms implemented in countries around the world, addressing concerns from critics about their potential harm or ineffectiveness.Originality/valueThe results indicate that country-level board reforms reduce the extent to which shareholder–creditor conflicts harm shareholders.

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