This study examines the impact of managerial foreign experience on corporate innovation using manually collected data of Chinese listed companies. We find that managerial foreign experience is positively associated with corporate innovation. This association is robust to a series of robustness checks, including the use of Heckman two-step sample selection model, propensity score matching procedure, and the market reaction to the appointing announcements of managers with foreign experience. Further analyses indicate that senior managers with foreign experience have a more significant impact on corporate innovation than junior managers with foreign experience; both foreign study experience and foreign work experience have important impacts on corporate innovation; managers with foreign experience in private enterprises have more initiatives to innovate than in state-owned enterprises; and managers who gain foreign experience in the United States tend to be more influential and innovative than those who have foreign experience from other countries or regions. Overall, our results suggest that managerial foreign experience matters for corporate innovation in emerging markets.

Political connections provide firms with legal advantages and can shield managers and directors away from litigation risk. Using a sample of Chinese public firms, we find that politically connected firms have lower demand for the directors' and officers' liability insurance (D&O insurance). The association is robust to Heckman two-step selection model, an examination of market reaction to the departure of politically connected managers, a difference-in-differences analysis surrounding the hiring of a politically connected CEO, and controlling for firm performance. The effect is attenuated for firms in regions with strong market development and legal environment, but is accentuated for firms that are less socially important to the local government. Our findings highlight a substitution effect between political connections and D&O insurance in protecting managers and directors against legal liability, and advance our understanding of the key drivers of D&O insurance purchase in emerging markets.

We investigate the impact of directors' and officers' insurance (D&O insurance) on stock price crash risk. We find that D&O insurance in China is negatively associated with stock price crash risk. This association is robust to a series of robustness checks including the use of alternative sample, Heckman two-step sample selection model, propensity score matching procedure, fixed effects model, the inclusion of some possibly omitted variables, and bootstrap method. Further analyses show that the impact of D&O insurance on crash risk is more pronounced in firms with lower board independence, non-Big 4 auditors, lower institutional shareholdings, and weaker investor protection; and the negative relationship between D&O insurance and crash risk is not driven by the eyeball effect. Moreover, we find that D&O insurance purchase is associated with less financial restatements and more disclosure of corporate social responsibility reports. Our findings provide support to the notion that D&O insurance appears to improve corporate governance.

We use a novel experiment in China to examine the effects of having a quasi-official investor own a small number of shares on specific firm outcomes. We find that, relative to control firms, pilot firms experience an increase in dissenting votes from independent directors, a reduction in tunneling and earnings management activities, and an improvement in merger performance. Independent directors questioned by the quasi-official shareholder in activism events subsequently lose board seats in the director market. Overall, our results shed light on a new mechanism for enhancing the protection of minority shareholders.

Mutual funds have emerged and rapidly developed since 2000 in China. This study tests empirically the impact of mutual funds’ ownership on firm performance in China, using a large sample for the period of 2001–2005. We find that equity ownership by mutual funds has a positive effect on firm performance. The result is robust to several measures of firm performance and various estimations. Our finding supports recent regulatory efforts in China to promote mutual funds as a corporate governance mechanism and suggests that pooling diffuse minority interests of individual shareholders who are prone to free-rider problems via mutual funds is beneficial.