The determinants of adjustment speed of board structure: evidence from Chinese listed companies

Yunhe Li () and Faqin Lan
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Yunhe Li: East China Normal University
Faqin Lan: East China Normal University

Review of Managerial Science, 2021, vol. 15, issue 3, No 7, 725-753

Abstract: Abstract Using data from China’s publicly listed companies, this study investigates how firms adjust their board structure in China. We observe that between 2007 and 2013, 45% of firms changed the size or the independence of their boards during a given 2-year interval. We also find that the companies frequently adjust their board structure toward a target board structure. Based on agency theory and resource dependency theory, we have developed a novel trade-off framework between and within a board’s monitoring and advisory functions to examine the dynamic adjustment of board structure in China. The board adjustment is asymmetrically determined by both monitoring-driven adjustment and by advisory-driven adjustment. For state-owned enterprises (SOEs), a change of board independence is directed more by monitoring-driven than by advisory-driven adjustment, whereas for privately owned enterprises (POEs) such change is propelled less by monitoring-driven than by advisory-driven adjustment. For SOEs, a change in board size is influenced more by advisory-driven than by monitoring-driven adjustment, while for POEs it is affected less by advisory-driven than by monitoring-driven adjustment. The findings offer insight into the dynamic adjustment of board structure in China’s emerging economy, where companies achieve economic efficiency in response to their environment.

Keywords: Board adjustment; Board structure; China; Corporate governance; POE; SOE (search for similar items in EconPapers)
JEL-codes: D23 G34 G38 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s11846-019-00357-0

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