Ex‐military Top Executives and Corporate Violations: Evidence from China

Abstract

We examine the association between corporate violations and executives who formerly served in the military, using a sample of A‐share listed firms in China from 2004 to 2018. We find that firms led by ex‐military executives are less likely to incur corporate violations. Further tests indicate that where there is a negative relationship this association is more pronounced for non‐financial corporate violations than for cases involving financial fraud. We also confirm that the association between corporate misconduct and firms with ex‐military executives is more significant if the firm has insufficient external oversight. The results are robust to a series of robustness tests. Overall, our results suggest that executives’ exposure to military culture has a governance effect in regulating corporate behaviour and outcomes in emerging economies.