Working Papers
Academic Directors: Innovation Advocates in the Boardroom (with Jin Xu and Yutong Xie) SSRN
We show that academic directors significantly increase firms’ innovation activities. Following an academic director’s exogenous departure, the average firm reduces the number of patent applications by 5.8%, and its patent citations decrease by 14%. The relationship between academic directors and innovation is not driven by other board characteristics or PhD CEOs. Investigations into the channels suggest that academic directors hire pro-innovation directors, use forced turnovers and compensation incentives to motivate CEOs, and bring disciplinary expertise to firms.Political Homophily and Director Appointments (with Yongqiang Chu) SSRN
We find that director candidates who share political alignment with the hiring firm's CEO are more likely to gain board appointments, even after controlling for boardroom diversity and local political ideology. This effect strengthens during high polarization or after the CEO's exposure to partisan media. CEOs strategically appoint political allies to maintain support during performance declines and gain better advisory services before acquisitions. Appointing aligned directors is associated with higher announcement returns and voting support when firms' advising needs are higher, but poorer outcomes when monitoring needs are higher. Lacking effective oversight, these directors command higher pay and retain their seats. Our findings suggest that political cronyism can influence director selection with implications for shareholder interests.
Connected CEO Hiring: Meritocracy or Cronyism? (with Yutong Xie and Jin Xu) SSRN
We find that a CEO candidate’s personal ties with a firm’s board significantly increase her probability of being selected by the firm. Firms that hire connected CEOs experience greater performance improvement than those that hire unconnected CEOs, but only when the connections were built through professional interactions. The performance differential is concentrated among firms with severe information asymmetry, high CEO termination risk, and large coordination costs. Further evidence suggests that professional ties help boards find good-fit CEOs, reduce search costs, help CEOs gain more shareholder voting support, and reduce the need for signing bonuses to new CEOs.
The Ties that Thrive: Audit Committee Affiliated Donations and Financial Reporting Quality (with Alicia Li, Jeffrey Pittman, and Jin Xu)
We find that when firms donate to charities affiliated with their audit committee members, financial reporting quality improves. Consistent with a genuine link between such donations and the directors on the audit committee, affiliated donations typically begin when directors join the audit committee and end when they leave. Neither corporate culture nor directors' philanthropic preferences fully explain these effects. The results are consistent with a reputation-protection channel, whereby directors who receive donations enhance financial reporting quality to protect their valuable reputation, and an incentive channel, whereby affiliated donations help retain directors while motivating them to closely monitor the financial reporting process through the appointment of industry specialist auditors, strengthening internal controls, and increasing their monitoring commitment.