Culture from overseas and corporate transparency: Evidence from China

Abstract

AbstractWe study how cultural norms from overseas affect corporate transparency. Using cultural background information on board directors, we document that corporations with directors with culture from overseas have greater corporate transparency. Specifically, we show that firms with directors with foreign cultural background have more voluntary information disclosure, more analyst coverage, more accurate earnings forecast and less earnings management. Moreover, these firms are more likely to choose Big 4 auditors. We also find that the relationship between culture from overseas and corporate transparency are more strongly positive when the directors have foreign experience from more incorruptible countries or districts. Our findings provide evidence on how directors spread transparency cultural norms rooted in their hearts to firms in developing countries.