Abstract

China's securities regulators require all public-listed companies to have at least one independent director with accounting expertise in order to protect minority shareholder interests from the largest shareholder's exploitation. We argue that the largest shareholder of a company may symbolically comply with this regulatory requirement by appointing an independent director with nominal credential but no real experience in accounting (or auditing). With panel data on listed companies in China's stock exchanges in 2005-2013, we found that the ownership of a company's largest shareholder increases the likelihood of symbolic appointment of accounting independent director. We also found that analyst coverage decreases the likelihood and weakens the impact of the largest shareholder's ownership on the likelihood of symbolic appointment of accounting independent director. Moreover, we demonstrated that symbolic appointment of accounting independent director is positively related to the subsequent tunneling behav...

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