Trust and Deception in Proximity：Independent director-Executives Faultlines and Executive corruption

Abstract

Abstract Using a sample of China-A-share listed firms from 2008 to 2017, we examine the impact of the independent director-executives faultlines on executive corruption. The results suggest that the independent director-executives faultlines have a “double-edged sword” effect; it significantly inhibits the possibility of executives explicit corruption but aggravates executives implicit corruption. Further tests show that independent directors with legal backgrounds and academic experience have a more obvious inhibitory effect on explicit corruption. The non-local independent directors play a catalytic impact on the faultlines, and the power constraint of executives forms a superimposition effect with the faultlines, which all strengthen the faultlines inhibition effect on explicit corruption and the aggravation effect on implicit corruption. The research of this study shows the governance of independent directors under a “ties-oriented” culture in China and plays a specific enlightening role in the reconstruction of the ecology of independent directors.