Vol.41 Issue.1, 2022

  • Are Independent Directors Rewarded for Their Monitoring? Empirical Evidence from Chinese Listed Firms

Authors: Jyun-Ying Fu

Pages: 23-42


Publish date: 2022/01/01

Download: PDF


Purpose – Our study examines how independent directors’ behaviors on a board might impact their career outcomes at the focal firm. We utilize an institutional lens as a guide to argue that directors who dissent at board meetings might not be reappointed by the focal firm. Additionally, by taking into account firm- and industry-level environments, we offer a more socialized view of the effect of dissenting votes on directors’ reappointment.

Design/methodology/approach – Our study utilizes a sample of the voting behavior of independent directors in Chinese A-share listed firms over a period of ten years from 2004 to 2013. We use the logistic regression and the multilevel logistic regression to test our hypotheses.

Findings – We find that directors’ dissenting votes at board meetings would reduce directors’ likelihood of reappointment at the focal firm. However, the negative impact of directors’ dissent on the likelihood of reappointment becomes weaker for firms experiencing executives’ dissent and for firms located in fraud-plague industries.

Research limitations/implications – We only examine one form of director monitoring activities, i.e., voting. Other forms of monitoring activities are worth further investigation.

Practical implications/Social implications – Our findings reveal the dark side of diligent director monitoring, i.e., the reduced likelihood of reappointment by the focal firm. Directors may consider other monitoring activities such as raising potential issues about proposals beforehand.

Originality/value – Our study highlights how director monitoring would be viewed as a norm-violating action and its impact on directors’ career outcomes.

Keywords – Institutional perspective, Legitimacy, Norm violation, Independent director monitoring


Jyun-Ying Fu (2022), "Are Independent Directors Rewarded for Their Monitoring? Empirical Evidence from Chinese Listed Firms," Management Review, 41(1), 23-42. https://doi.org/10.6656/MR.202201_41(1).ENG023