The Impact of Independent Directorship on Business Performance in China: Empirical Study on SSE Listed Firms

Abstract

In an effort to enhance the influence of independent directors within the framework of corporate governance, the China Securities Regulatory Commission (CSRC) has recently introduced revised regulations pertaining to independent directorship in August 2023. This regulatory adjustment signifies a pivotal step towards bolstering Chinese-specific corporate governance. This research endeavors to delve into the potential impact of independent directorship on business performance within mainland China's corporate landscape. This study harnesses data from publicly traded companies on the Shanghai Stock Exchange (SSE) in conjunction with panel data analysis and Ordinary Least Squares (OLS) regression to build empirical models. It is noteworthy that the initial results indicate a favorable connection between independent directorship and business performance. It has been demonstrated that having more independent directors is connected with better corporate profitability. Against the backdrop of the newly implemented regulatory reforms concerning independent directors, this study is poised to make a substantive contribution to the ongoing discourse on corporate governance and its ramifications for business performance in China. As these revised regulations usher in a renewed emphasis on independent directorship, this research's insights hold significant relevance for both practitioners and policymakers navigating the evolving corporate governance landscape.