Co-opted directors, gender diversity, and crash risk: evidence from China

  • Erin H. Kao
  • Ho-Chuan Huang
  • Hung-Gay Fung
  • Xiaojian LiuEmail author
Original Research


This study examines how the composition of the board of directors at Chinese firms affects crash risk. The results indicate that co-opted directors (i.e., directors appointed after the CEO assumed office) have a positive and significant effect on crash risk; the positive relation between board directors and crash risk is primarily driven by co-opted male directors, implying a gender difference on crash risk. Non-co-opted independent directors mitigate crash risk, but the negative relation between gender and crash risk is much stronger for female directors than for male directors. The results indicate that co-option/non-co-opted independence along with gender diversity on the board plays an important role in shaping crash risk behaviors. The director-crash risk linkage disappears at state-owned enterprises, suggesting that ownership structure affects board behaviors and board members play the role of rubber-stamp. Finally, the relation between gender and crash risk is more pronounced at crash-risk prone firms with high earnings management and high financial leverage.


Co-option Crash risk Gender diversity Independent director State-owned enterprises 

JEL Classification

G3 G32 G34 



We are grateful to the constructive comments and recommendations of the Editor, Cheng-Few Lee, and an anonymous reviewer. We also appreciate participants at 2019 27th Annual Conference on Pacific Basin Finance, Economics, Accounting, and Management (PBFEAM) at Taiwan University. This research was partly supported by the Ministry of Science and Technology (MOST) of Taiwan (Grant Nos. 107-2410-H-029-050 and MOST 107-2410-H-032-015).


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© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Department of International BusinessTunghai UniversityTaichung CityTaiwan R.O.C.
  2. 2.Department of Banking and FinanceTamkang UniversityNew Taipei CityTaiwan R.O.C.
  3. 3.College of Business AdministrationUniversity of Missouri St. LouisSt. LouisUSA
  4. 4.College of Finance and StatisticsHunan UniversityChangsha CityChina

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