Do the Characteristics of Independent Directors and Supervisory Board Members Matter in China?

Abstract

This paper investigates and compares the characteristics of independent directors and supervisory board members in Chinese listed firms. The occupational backgrounds of independent directors and supervisory board members in listed firms are very different. Besides, different firms have different preferences in employing independent directors and supervisory board members according to their demands. Moreover, the empirical results show that characteristics of independent directors and supervisory board members have no clear relationship with firm performance. No matter their professional backgrounds or age, the independent directors and supervisory board members do not have the authority to affect the decision making process of management. Thus they cannot really contribute to firm performance.

The Influence of the Government on Corporate Environmental Reporting in China: An Authoritarian Capitalism Perspective

“…Finally, SSE 180 companies are widely used in studies where listed companies are examined in the Chinese context. For example, Koutmos (2012), Xu and Lin (2016), and Grimminger and Benedetta (2013), all use the SSE 180 in their studies.…”

Empirical Insights into Supervisory Boards of Listed Companies in China

“…Therefore, it is necessary to understand the situation of the board of directors before looking at the supervisory boards. Accordingly, the second set of questions in the interview focused on the board of directors, with especial focus on the function of independent directors, inspired by the likes of Xu & Lin [13] and Jiaguo [21].…”

“…Tian [2] argued that supervisors are mainly focused on questions of legality, whereas independent directors mainly work to assess the efficiency and capacity of the company's operators from an objective angle. However, Xu and Lin [13] suggested that the responsibilities of independent directors and supervisors largely overlap but that neither has real authority to affect management decisionmaking processes.…”

“…Nevertheless, SOEs today still represent a significant portion of the companies listed on the stock exchange [11,12]. The State-Owned Assets Supervision and Administration Commission (SASAC), which is the branch office of the State Council of China, acts as a representative of shareholders in SOEs and has great power in nominating members to boards of directors and supervisors [13]. Finally, there is a Communist Party committee in every state-owned company, and currently the central government considers its role to include leading and monitoring the whole company.…”

“…Xu and 5 e.g. Cao, [22]; Ding, [23]; Zhou, [27] Lin [13] and Tian [2] argued that the responsibilities of independent directors and supervisors should be more clearly delineated. Hu et al [36] suggested that ownership concentration was hindering the governance role of directors and supervisory boards.…”