Board Business Connections and Firm Profitability: Evidence from China

Yu Liu, Feixue Xie and Zhenning Xu

Emerging Markets Finance and Trade, 2019, vol. 55, issue 9, 1954-1968

Abstract: Using a unique dataset on board directors from 2008 to 2016, we document a positive relationship between board business connections and firm profitability for listed firms in China. The positive relationship is robust to various estimation methods and is stronger when the connections are possessed by independent directors or extended to listed firms. Finally, well-connected firms are more likely to have access to external financing and to obtain favorable audit opinions. Overall, our findings signify the importance of connections (guanxi) in business activities in China.

Date: 2019
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DOI: 10.1080/1540496X.2018.1498332

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