Bankers in the Boardroom and Firm Performance in China

Qing He (), Oliver Rui and Chenqi Zhu

Emerging Markets Finance and Trade, 2016, vol. 52, issue 8, 1850-1875

Abstract: We use a dataset comprising the appointments of commercial bankers as board of directors at Chinese listed firms and find that financially distressed firms are more likely to recruit a commercial banker as a director of the board. The presence of a banker on the board increases access to bank loans, yet many investors react negatively to announcements of such appointments. We also find that such appointments are typically followed by a drop in the appointing firm’s operating performance, and an increase in rent-seeking activities. This suggests that bank directors cannot strengthen corporate governance. Most financial resources are expropriated by corporate insiders.

Date: 2016
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DOI: 10.1080/1540496X.2015.1032144

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