Abstract
We find that Chinese CEOs with foreign experience tend to engage less in related-party transactions. This result holds through various analyses, including firm-fixed effects model estimations, propensity score matching, and instrumental variable regressions. The effect of CEO foreign experience is pronounced for companies in which the state enforces regulations (non-state-owned enterprises and firms without political connections). It is not evident when alternative governance mechanisms exist (independent boards and foreign shareholders). We find that related-party transactions tend to decline especially when the CEO experienced a country with more developed institutional environments. These findings highlight the importance of having CEOs with foreign experience in emerging markets.
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