Doing Good Business by Hiring Directors with Foreign Experience

Abstract

Using a manually collected dataset on the overseas experiences of directors for Chinese listed firms, we examine effects of returnee directors on firms’ corporate social responsibility (CSR) engagement. Our results show that returnee directors significantly improve firms’ CSR engagement. The positive relationship between the percentage of returnee directors and CSR engagement only exists when a firm is in competitive industries, when a firm has a government shareholder, when a firm has higher leverage, when a firm’s CEO is not politically connected, and when a firm’s CEO is older. Furthermore, we find that only returnee directors’ long-term foreign professional or academic experience matters, and short-term visiting experience does not contribute to the above findings. Finally, our results are robust after controlling for endogeneity. This paper thus offers clear policy implications by suggesting that hiring more returnees as management directors is an efficient way to enhance firms’ CSR quality, which may be of particular interest to regulators in emerging markets.