Beyond compliance: Independent director and investment efficiency in China's central state-owned enterprises
Year: 2026
Type: article
Abstract: This study examines the impact of independent directors on investment efficiency in China’s listed central state-owned enterprises (CSOEs), a sector characterized by strong state involvement and strategic importance. Unlike prior studies that assume a linear relationship, our analysis reveals a non-linear effect: board independence enhances investment efficiency only when the proportion of independent directors exceeds a critical threshold of 48%, which is significantly higher than the one-third regulatory minimum. Using a comprehensive panel of 266 listed CSOEs from 2011 to 2019 and addressing endogeneity concerns through instrumental variable estimation and propensity score matching, we show that this threshold effect is unique to CSOEs and absent in local SOEs and privately controlled firms. Further analysis reveals that the positive influence of independent directors is concentrated in firms prone to overinvestment and is shaped by director attributes, including gender diversity, international experience, and compensation structures. However, excessive central government control weakens these beneficial effects. Overall, our findings challenge the notion of “one-size-fits-all” governance reforms and highlight the importance of context-specific board structures in state capitalism, providing policy insights for enhancing the efficiency of strategically vital state-owned enterprises.
Authors: Daniel Chai, Hsin-I Chou, Xin Geng, Jing Zhao
Institutions: RMIT University, Zhejiang University
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: gold
Estimated APC paid: $1,930
OpenAlex ID: W7118187605