Foreign Investor Governance and Overlapping Membership on Board Committees: Evidence From Chinese Banks

ABSTRACT

We examine whether and how foreign investor governance influences overlapping membership on board committees. Using manually collected data on Chinese listed banks from 2007 to 2024, we find that foreign investor governance is positively associated with overlapping membership on board committees in Chinese banks. The results are robust to lagging the independent variables by 1 year, two‐stage least squares, Heckman two‐stage analysis, and a battery of sensitivity tests. This positive effect is more pronounced in banks with poorer information environments, less capital, and more foreign investors from civil law countries. Furthermore, foreign investor governance improves bank asset quality by promoting overlapping membership on board committees. Finally, the role of foreign investor governance in promoting overlapping membership on board committees is more evident when the bank assigns stronger monitors to multiple board committees, assigns members to multiple board monitoring committees, is a joint‐stock commercial bank, or has higher foreign bank governance. Our findings highlight the role of foreign investors in shaping board committee membership arrangements, providing banks with the opportunity to better arrange board committee members in line with foreign investors' monitoring expectations.