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Does the fellow‐villager relationship between the independent director and the chairman of the board can inhibit the major shareholder expropriation? Evidence from China
Author(s) -
Yu Yike,
Cao Danting,
Wang Zuogong,
Zhang Zaijie
Publication year - 2021
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.3301
Subject(s) - expropriation , shareholder , reputation , china , equity (law) , accounting , business , management , finance , economics , law , corporate governance , political science
We studied the influence of the fellow‐villager relationship between the independent directors and the chairman of the board and found that the above relationship significantly eased the shareholder's encroachment. Furthermore, the above suppression effect is more significant in the poor formal institutional environment, and higher equity balance will weaken the restraining effect. At last, we revealed that the reputation mechanism presented the key factor that urged independent directors to exert influence on the decision of the chairman through the fellow‐villager relationship and, in turn, inhibited the encroachment.