While the influence of corporate governance on financial strategies is well-documented, the specific role of academic directors in shaping corporate leverage, particularly within the Chinese context, remains underexplored. This paper aims to fill this gap by examining how academic directors impact corporate leverage, with a focus on the moderating effects of external governance mechanisms and ownership structure in Chinese A-listed firms.
This study uses a comprehensive panel dataset comprising 39,049 firm-year observations from 2003 to 2020. To ensure robustness and mitigate endogeneity concerns, the analysis incorporates various econometric techniques, including ordinary least squares, two-stage least squares, reverse causality tests and entropy balancing. The consistency of the results across different estimation methods underscores the reliability of the findings.
The findings reveal a significant negative relationship between the presence of academic directors and corporate leverage. This relationship is further moderated by external governance factors such as foreign ownership and Big 4 auditors, with a more pronounced effect observed in private firms compared to state-owned enterprises. In addition, corporate social responsibility is identified as a critical mediating factor, linking academic directors to reduced corporate leverage.
The findings suggest that the presence of academic directors is associated with more conservative financial policies and stronger governance, particularly under effective external monitoring. While not implying causality, this evidence highlights their potential value in enhancing board oversight. Firms and policymakers should consider the conditions under which academic directors can contribute meaningfully to governance quality and shareholder protection.
To the best of the authors’ knowledge, this study is among the first to comprehensively explore the impact of academic directors on corporate leverage in China, considering the moderating roles of external governance and ownership structure. It contributes to the broader corporate governance literature by providing new insights into how academic directors influence financial decision-making and leverage strategies.
