Does the informal hierarchy of independent directors have a corporate governance effect? Evidence from China

ABSTRACTABSTRACTUsing a large sample of Chinese A-share listed firms during 2008–2017, this study investigates whether and how the informal hierarchy of independent directors affects two types of agency costs. We find that the informal hierarchy of independent directors is negatively correlated with the two types of agency costs and the negative effect is robust to alternative empirical designs. Moreover, our further research indicates that ownership structure matters for the performance of independent directors. We provide empirical evidence for optimizing the independent director team structure and improving corporate governance.KEYWORDS: Independent directorinformal hierarchyagency costownership structurecorporate governance Disclosure statementNo potential conflict of interest was reported by the author(s).Additional informationFundingThis work was supported by Liaoning social science planning fund [L19AGL001].