Geographical distance of independent directors, high-speed rail, and corporate innovation

Abstract

ABSTRACT Independent directors are an important internal governance mechanism, and the characteristics of independent directors influence the strategic decisions of the company. With the emergence of research on the impact of geographical location on economic entities, geographical distance is gradually gaining attention in corporate governance. However, relatively few studies in emerging markets have analysed the effectiveness of independent directors’ performances in terms of geographical location factors. We determine the location of independent directors by manually searching their biographies, annual reports, and news reports, calculate the geographical distance between the location of independent directors and listed companies, analyse the relationship between the geographical distance of independent directors and firm innovation, and test the moderating effect of high-speed rail (HSR) construction. The test results show that the geographical distance between independent directors and the companies they work for can inhibit corporate innovation and that the construction of HSR in the cities where listed companies are located can mitigate this inhibiting effect. We extend the study of geographical location characteristics influencing economic behaviour to the field of independent directors, enriching the study of factors influencing corporate innovation in emerging markets.