Independent Directors’ Board Networks and Controlling Shareholders’ Tunneling Behavior

China Journal of Accounting Research, Volume 7, Issue 2, June 2014, Pages 101-118

18 Pages Posted: 10 Oct 2015 Last revised: 21 Nov 2019

See all articles by Yunsen Chen

Yunsen Chen

Central University of Finance and Economics (CUFE)

Yutao Wang

Central University of Finance and Economics (CUFE)

Lin Le

Tsinghua University - School of Economics & Management

Date Written: October 8, 2011

Abstract

As one of the channels by which board directors build important relationships, board networks can affect the governance role of independent directors. Defining director board networks as their connections based on direct ties they establish when serving on at least one common board, this paper explores the role of the network centrality of independent directors in restraining tunneling behavior by controlling shareholders in the Chinese capital market. Our empirical evidence shows that tunneling behavior by controlling shareholders is negatively related to the network centrality of independent directors and that this relationship is stronger when non-operating fund occupation is used as the measure of tunneling. The results of our study show that board networks can help independent directors to restrain tunneling behavior by large shareholders, which plays a positive role in corporate governance.

Keywords: Independent director; Tunneling; Social network; Board Network; China

JEL Classification: G30; L14; M00

Suggested Citation

Chen, Yunsen and Wang, Yutao and Le, Lin, Independent Directors’ Board Networks and Controlling Shareholders’ Tunneling Behavior (October 8, 2011). China Journal of Accounting Research, Volume 7, Issue 2, June 2014, Pages 101-118, Available at SSRN: https://ssrn.com/abstract=2671569

Yunsen Chen (Contact Author)

Central University of Finance and Economics (CUFE) ( email )

39 South College Road
Haidian District
Beijing, Beijing 100081
China

HOME PAGE: http://yunsenchen.weebly.com/

Yutao Wang

Central University of Finance and Economics (CUFE) ( email )

39 South College Road
Beijing, Beijing 100081
China

Lin Le

Tsinghua University - School of Economics & Management ( email )

Beijing, 100084
China

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