The Brain Gain of Corporate Boards: A Natural Experiment from China

Mariassunta Giannetti, Xiaoyun Yu and Guanmin Liao (liaoguanmin@gmail.com)

No 9190, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study the impact of directors with foreign experience on firms in emerging markets. To establish causality, we use a unique dataset from China and exploit that at different times, Chinese provinces introduced policies to attract highly talented emigrants. These policies led to an exogenous increase in the supply of Chinese individuals with foreign experience in the local labor market and ultimately increased the likelihood that firms in these provinces had directors with foreign experience in comparison to firms with a similarly high demand for these skills elsewhere. We document that hiring directors with foreign experience results in higher firm valuation, productivity, and profitability. Furthermore, corporate governance improves and firms are more likely to make international acquisitions, to export, and to raise funds internationally. These results indicate that the transfer of knowledge to emerging markets occurs not only through foreign investment, but also through labor flows and, in particular, return migration.

Keywords: Corporate boards; Corporate governance; Human capital; Firm performance; Firm productivity (search for similar items in EconPapers)
JEL-codes: D22 D80 F21 F22 G30 J24 (search for similar items in EconPapers)
Date: 2012-10
New Economics Papers: this item is included in nep-eff, nep-hrm and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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