The appointment of celebrities to corporate boards in China: sword or shield?

ABSTRACT

This study examines whether reputation mechanism works for celebrity independent directors in China. We find that firms with celebrity independent directors experience higher multiple agency costs and worse performance, indicating that managers and/or large shareholders take celebrity-independent directors as a shield for facilitating grabbing private benefits. In addition, this effect varies between state-owned enterprises and non-state-owned enterprises.

KEYWORDS:

• Agency costs
• celebrities
• China
• independent directors
• reputation mechanism

JEL CLASSIFICATION:

• G32
• G38
• P20

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

This work was supported by the National Natural Science Foundation of China [71202061 and 71572160].