Does CEO Connectedness in China Matter? Evidence From China's Access to WTO

Abstract

I study whether U.S. CEOs well connected in China better capture investment opportunities from China after China’s accession to the WTO. I find that Chinese connected CEOs realize larger sales from China, better announcement returns of investment activities involving Chinese firms, greater long-term firm value and operating performance, higher pay, and more future directorships when investment opportunities from China increases, especially for CEOs’ connections with political officers in China. These relations are also stronger for firms that lack relevant information about Chinese environment in the boardroom. My results are robust to various controls for managerial skill and regulatory reforms in China as well as tests for endogeneity.