Using the Chinese A-share listed companies as the sample, this paper examines the role of legal background of independent directors in suppressing executive crime and guarding against corporate risks for the first time, and further discusses its action path.It arrives at the conclusions as follows:firstly, legal background of independent directors plays a role in restrictions on executive duty-related crime in listed companies, and the more diversified legal background and richer practical experience of independent directors result in lower probability of executive duty-related crime; secondly, on the one hand, lower probability of executive duty-related crime results from the self-selection of low-risk companies by independent directors with legal background, showing signaling effect; on the other hand, independent directors with the lawyer background also play active supervisory and governance role in the service process; thirdly, the restriction role of independent directors with legal background in executive duty-related crime also depends on types of crime and the concealment & seriousness of criminal act itself.It not only provides the evidence of the effects of law on corporate governance at micro level, has a certain reference value for making full use of legal expertise of independent directors by enterprises and identifying corporate risks by regulatory authorities.
Legal Background of Independent Directors: Governance, Signals, or Judicial Asylum? Empirical Evidence Based on Executive Crime in Listed Companies
Journal of Finance and Economics Vol. 43, Issue 02, pp. 34 - 47 (2017) DOI:10.16538/j.cnkij.fe.2017.02.002
Cite this article
Quan Yi, Chen Donghua. Legal Background of Independent Directors: Governance, Signals, or Judicial Asylum? Empirical Evidence Based on Executive Crime in Listed Companies[J]. Journal of Finance and Economics, 2017, 43(2): 34–47.
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