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Mitigating Negative Spillovers from Categorization of Foreign-Listed Firms: The Role of Host-Country Independent Directors

Published online by Cambridge University Press:  05 April 2019

Eugene Kang  and
Asda Chintakananda
Eugene Kang
Affiliation:
Nanyang Technological University, Singapore
Asda Chintakananda*
Affiliation:
National Institute of Development Administration, Thailand
*
Corresponding author: Asda Chintakananda (asda.chi@nida.ac.th)
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Abstract

This study examines how cognitive categorization by host-country investors give rise to negative spillovers among host-country foreign-listed firms from the same home country when one of these foreign-listed firms discloses a financial reporting irregularity. This study further examines how attributes of host-country independent directors mitigate such negative spillover effects through signaling fulfilment of their fiduciary duties. Our results based on Chinese foreign-listed firms on the Singapore Stock Exchange from 2007–2014 reveal that host-country independent directors increase spillover effects among foreign-listed Chinese firms from financial reporting irregularities. However, such increase is attenuated when these directors signal fulfilment of their fiduciary duties through home-country, industry, or task-related experiences, and the observed mitigating effect is stronger when they possess a combination of these experiences.

摘要

本研究探讨了当一家外国上市公司披露财务报告违规行为时，东道国投资者的认知分类如何引起来自同一母国在东道国上市的外国公司的负面溢出效应。研究进一步探讨了东道国独立董事的属性如何通过释放信号履行其受托责任来减轻这种负面的溢出效应。我们基于2007-2014年在新加坡证券交易所上市的中国外资上市公司的研究结果显示，东道国独立董事会增加来自中国的上市公司的财务报告违规行为的溢出效应。然而，当这些董事通过母国、行业或职业相关的经验表明他们的信托义务的履行时，这种增加会减弱，并且当他们拥有这些经验的组合时观察到的减轻影响更强。

Аннотация

В этом исследовании рассматривается, как когнитивная категоризация со стороны инвесторов из принимающей страны приводит к негативным побочным эффектам для иностранных компаний из одной и той же страны, когда одна из этих иностранных компаний нарушает финансовую отчетность. В данной работе также изучается, какие качества независимых директоров в принимающей стране нивелируют негативные побочные эффекты, благодаря выполнению фидуциарных обязанностей. На основании данных из китайских компаний, зарегистрированных на Сингапурской фондовой бирже в период 2007–2014 годов, делается вывод о том, что независимые директора в принимающей стране способствуют усилению побочных эффектов среди китайских компаний из-за нарушений финансовой отчетности. Тем не менее, такой эффект ослабляется, когда эти директора сигнализируют о выполнении своих фидуциарных обязанностей в том случае, если они обладают опытом, связанным со страной происхождения, отраслью или задачами, при этом наблюдаемое воздействие усиливается, когда они обладают комбинацией этих качеств.

Resumen

Este estudio examina cómo la categorización cognitiva por los inversionistas da lugar a efectos indirectos negativos entre las empresas del país anfitrión que cotizan en el extranjero del mismo país de origen cuando una de estas empresas que cotizan en el extranjero revela una irregularidad en los reportes financieros. Este estudio además examina cómo los atributos de directores independientes del país anfitrión mitigan los efectos indirectos negativos mediante señalamiento del cumplimiento de sus obligaciones fiduciarias. Nuestros resultados basados en empresas chinas que cotizan en el extranjero en el Mercado de Valores de Singapur entre 2007 y 2014 revelan que los directos independientes del país anfitrión aumentan los efectos indirectos entre las empresas chinas que cotizan en el extranjero debido a las irregularidades de los reportes financieros. Sin embargo, este aumento es atenuado cuando estos directos señalan cumplimiento de sus obligaciones fiduciarias a través de experiencias relacionadas con el país de origen, industria o tarea, y el efecto mitigador observado es más fuerte cuando ellos poseen una combinación de estas experiencias.

Keywords

cognitive categorizationcorporate governancedirector independenceforeign listingnegative spilloversignalling effects认知分类公司治理董事独立性外国上市负面溢出信号效应когнитивная категоризациякорпоративное управлениенезависимость директоровзарубежный листингнегативный побочный эффектсигнальные эффектыcategorización cognitivagobierno corporativoindependencia del directorcotización en el extranjeroefectos indirectos negativosefectos de señalamiento
Type
Article
Information
Management and Organization Review , Volume 15 , Issue 4 , December 2019 , pp. 773 - 807
Copyright
Copyright © 2019 The International Association for Chinese Management Research 

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Footnotes

Accepted by: Senior Editor Jing Li

References

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