Geographical distance of independent directors, high-speed rail, and corporate innovation

ABSTRACT

Independent directors are an important internal governance mechanism, and the characteristics of independent directors influence the strategic decisions of the company. With the emergence of research on the impact of geographical location on economic entities, geographical distance is gradually gaining attention in corporate governance. However, relatively few studies in emerging markets have analysed the effectiveness of independent directors’ performances in terms of geographical location factors. We determine the location of independent directors by manually searching their biographies, annual reports, and news reports, calculate the geographical distance between the location of independent directors and listed companies, analyse the relationship between the geographical distance of independent directors and firm innovation, and test the moderating effect of high-speed rail (HSR) construction. The test results show that the geographical distance between independent directors and the companies they work for can inhibit corporate innovation and that the construction of HSR in the cities where listed companies are located can mitigate this inhibiting effect. We extend the study of geographical location characteristics influencing economic behaviour to the field of independent directors, enriching the study of factors influencing corporate innovation in emerging markets.

KEYWORDS:

• Geographical distance
• independent directors
• high-speed rail
• corporate innovation

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

This work was supported by the National Natural Science Foundation of China (72002091); The Beijing Natural Science Foundation (9202010)

Notes on contributors

Dongliang Yuan

Dongliang Yuan is a junior research fellow at School of Management in the Lanzhou University. His current research interests include corporate governance, corporate innovation and stock price crash risk.

Duo Shang

Duo Shang is a lecturer at School of Economics and Management in the University of Science and Technology Beijing. Her current research interests include board governance and strategic management.

Yan Li

Yan Li is a Ph.D. candidate at Business School in the Nankai University. Her current research interests include corporate governance and corporate innovation.

Xinmei Wu

Xinmei Wu is a Ph.D. candidate at Business School in the University of International Business

and Economics. Her current research interests include board governance.