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Independent directors' dissent on boards: Evidence from listed companies in China

Strategic management journal, 2016-08, Vol.37 (8), p.1547-1557 [Peer Reviewed Journal]

Copyright © 2016 John Wiley & Sons Ltd. ;2015 The Authors. published by John Wiley & Sons Ltd. ;Copyright © 2016 John Wiley & Sons, Ltd. ;ISSN: 0143-2095 ;EISSN: 1097-0266 ;DOI: 10.1002/smj.2421 ;CODEN: SMAJD8

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  • Title:
    Independent directors' dissent on boards: Evidence from listed companies in China
  • Author: Ma, Juan ; Khanna, Tarun
  • Subjects: Boards of directors ; China ; corporate governance ; Directors ; independent directors ; inner workings of boards ; Outside directors ; Reciprocity ; social exchange theory ; Strategic management
  • Is Part Of: Strategic management journal, 2016-08, Vol.37 (8), p.1547-1557
  • Description: Research summary: Although opinion conformity is believed to be commonly used by corporate elites to invoke reciprocity, it is hard to study in the context of corporate boards since boards are typically "black boxes." Focusing on publicly traded companies in China, where disclosure of dissent is mandated, we show that dissent is associated with a breakdown of the social exchange relationship within boards. Specifically, dissent is more likely to occur when the board chair who appointed the independent director has left the board, or when the board "game" is reaching its last round, defined as a 60-day window before departure of the board chair or the director herself. Our findings lend considerable support to conceptualization of boards as a social exchange device. Managerial summary: With a novel datasetfrom China we ask the question of whether the social norm of reciprocity compromises independent directors' decisions. Our results lend considerable support to the hypothesis that independent directors would generally defer to top management as they feel indebted for being offered a director position and in exchange independent directors provide support. We identified two instances in which independent directors are more likely to dissent due to a breakdown of social exchange relationships: (1) when the board chair who appointed the independent director has left the board, and (2) when the board "game" was reaching its last round, that is, either the board chair or the director herself is leaving the board.
  • Publisher: Chichester, UK: John Wiley & Sons, Ltd
  • Language: English
  • Identifier: ISSN: 0143-2095
    EISSN: 1097-0266
    DOI: 10.1002/smj.2421
    CODEN: SMAJD8
  • Source: Alma/SFX Local Collection
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