Does Independent Director's Monitoring Affect Reputation? Evidence from Stock and Labor Markets

Abstract

Using novel data on independent directors' opinions in China, we investigate the stock and labor market effects prompted by independent directors publicly saying ''no" to major board decisions. We find that the market reacts negatively to modified director opinions, but positively to firms interlocked with the directors who said ''no." We further find substantial turnover and decline in board seats after independent directors issue modified opinions. Overall, we identify a dilemma in China whereby the labor market does not reward vigilant directors for standing up to firm insiders, although investors add a premium to effective board monitoring.

Mediation path study on the effect of venture capital support on firm's corporate social responsibility

“…From the perspective of self-interest protection, VC entry may have a negative impact on the firm proportion of INDDs. In the Chinese market environment, INDDs are often determined by the firm's major shareholders (Du et al, 2015), while VC often owns a significant firm share participation. VC is expected to have a decisive effect on firm INDD proportion as well as on the board of directors.…”