Independent directors and corporate performance: Evidence from listed firms in China

Abstract

In 2001, the Chinese Securities Regulatory Commission (CSRC) issued Regulation No.102 stipulating a minimum number of independent directors on corporate boards. We investigate whether the regulation had its intended effect of protecting minority shareholders and enhancing firm performance. Using a large sample of 2646 firm-year observations from 2001 to 2003, we find that both state-owned and non-state-owned firms improved their board independence significantly from the pre to the post regulation period, and firm performance significantly increased in the post regulation period for both types of firms, with the increase being greater in the case of SOE firms.