Beyond the ivory tower: Professors on the board and corporate performance in China

Professors are prevalent on boards of directors. Using manually collected data on professor-directors in Chinese A-share listed firms, we find that they make positive contributions to corporate performance. In contrast to previous findings in the U.S. context, we show that administrative professors in China perform as well as, if not better than, non-administrative professors when serving as independent directors. Our results remain robust when we use both the instrumental variables approach and event study approach to address endogeneity concerns. Further analyses provide evidence for the advising and monitoring channels through which professor-directors in China affect firm performance. Specifically, they are more likely to be appointed as chairpersons of board committees and to dissent in board voting; they also benefit their firms by improving investment efficiency and corporate governance. Our findings highlight the importance of cultural and institutional backgrounds in determining the effectiveness of governance mechanisms.