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Board directors with foreign experience and stock price crash risk: Evidence from China
Author(s) -
Cao Feng,
Sun Jian,
Yuan Rongli
Publication year - 2019
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/jbfa.12400
Subject(s) - corporate governance , stock price , crash , instrumental variable , business , china , robustness (evolution) , stock (firearms) , accounting , actuarial science , econometrics , agency cost , economics , financial economics , finance , shareholder , computer science , engineering , mechanical engineering , paleontology , series (stratigraphy) , political science , biochemistry , chemistry , gene , law , biology , programming language
This study examines the impact of board directors with foreign experience (BDFEs) on stock price crash risk. We find that BDFEs help reduce crash risk. This association is robust to a series of robustness checks, including a firm fixed effects model, controlling for possibly omitted variables, and instrumental variable estimations. Moreover, we find that the negative association between BDFEs and crash risk is more pronounced for firms with more agency problems, weaker corporate governance, and less overall transparency. Our findings suggest that the characteristics of board directors matter in determining stock price crash risk.