Three essays on the consequences of migrant top management team : evidence from China : a thesis presented in partial fulfilment of the requirements for the degree of Doctor of Philosophy in Accountancy at Massey University, Auckland, New Zealand

Abstract

This research investigates the consequences of migrant top management teams (TMT) using data of Chinese A-share listed firms. While the macroeconomics literature documents migration as a driving force in boosting a country’s economy, the understanding on how migration shapes corporate outcomes is still limited. Understanding the corporate outcomes of migrant TMT provides insights into how human capital movement shapes corporate governance and decision-making. This has important implications for firms to develop a more effective corporate governance system and for policymakers to strengthen formal institutions. This study is structured into three essays: (i) the association between migrant TMT and corporate innovation; (ii) the association between migrant TMT and insider trading profitability; (iii) the association between migrant CEO and audit fees. Essay One explores the association between migrant TMT defined as TMT comprised of one or more migrant managers and corporate innovation. Using hand-collected data for a sample of Chinese A-share listed firms spanning the period 2008-2020, I find a positive and significant association between a migrant TMT and corporate innovation including green innovation. My results remain robust to a set of endogeneity tests, including firm-fixed effects regression, entropy-balanced regression, and instrument variable regression. I then show that real earnings management and risk-taking are the channels through which the positive relationship between migrant TMTs and corporate innovation manifests itself: migrant TMTs engage less in real earnings management and are more likely to take risks. Finally, I find that the positive relationship between migrant TMTs and corporate innovation is more pronounced in state-owned firms, and remains significant in both high- and low-cultural diversity regions, suggesting that the observed effect is not primarily driven by cultural adaptability, but reflects a robust migration-driven mechanism. My findings contribute to the literature by providing novel evidence on how a migrant TMT affects corporate decision-making. In Essay Two, I examine the association between migrant TMT and insider trading profitability. Using a large sample of Chinese insider trading activities, I find that migrant TMT members earn significantly higher abnormal returns than non-migrant TMT members when they purchase their own firms’ shares. These migrant managers are more likely to exploit their private information related to future successful innovation. This positive association between migrant top managers and trading profitability weakens when migrant managers develop local social capital with local officials or possess legal experience. My findings suggest that migrant TMT members are more likely to exploit private information when making insider trades. These findings contribute to the literature by providing evidence on how migration shapes managerial decision-making in the context of insider trading. Finally, in Essay Three, I examine the association between migrant CEOs and audit fees. Using a sample of Chinese A-share listed firms spanning the period 2008-2020, I find that compared to other firms, firms with migrant CEOs tend to pay higher audit fees than any other clients but do not report longer audit report lag. This relationship is robust to controlling for various fixed effects, entropy balance matching, instrumental variables regression, and difference-in-difference analysis. I further find migrant CEOs, tend to demand high-quality auditing because of their innovative activities and thus pay higher audit fees. Cross-sectional tests show that the fee premium is diminished in firms with gender-diverse audit committees, and firms audited by longer-tenure auditors. My research sheds light on how management operating styles associated with migrant CEOs’ characteristics linked to audit fees.