Rookie independent directors and corporate fraud in China

Abstract This paper examines whether rookie independent directors (RIDs) have an effect on corporate fraud in Chinese public companies. In firm-level analysis, we find that the presence of RIDs increases the likelihood of corporate fraud. In director-level analysis, we reveal that rookie independent directors are less likely to dissent using the voting records collected from company announcements. And the cost of dissension for RIDs is the higher likelihood of losing current board seats, compared with seasoned independent directors. Our results are robust to alternative variables about the existence of RIDs, the IV approach and the conditional model.