Independent Directors and Corporate Performance in China: a Meta-Empirical Study

This article reviews empirical studies on the relationship between independent directors and firm performance in Chinese listed companies. The purpose is to generalize empirical evidence on the theoretical claim that independent directors can improve firm performance by performing their monitoring role over management as expected by Chinese regulators. To fulfil this purpose, this article conducts a meta-empirical study by collecting 30 sample articles of existing empirical studies on the relationship between independent directors and firm performance in Chinese listed companies after the independent director institution has been introduced from corporate America to corporate China. The meta-empirical study is to review and generalize an integrated empirical evidence whether independent directors can improve firm performance in Chinese listed companies or not. Based on the statistical data from 30 collected sample articles, this article identifies four categories (board independence, independent directors’ characteristic, background and compensation) that authors of 30 sample articles use to test the correlation between independent directors and firm performance in Chinese listed companies. From the integrated empirical evidence from 30 collected sample articles, this article finds on the whole that board independence has no significant impact on firm performance, that independent directors’ characteristics and background have a controversial effect on firm performance and that independent directors’ compensation has a significant positive effect on firm performance. This may suggest that independent directors may primarily play an advisory role but not a monitoring role in Chinese listed companies.