Corporate governance, firm performance and innovation: The Case of China's listed firms engaging in OFDI

We examine the corporate governance and innovation relationship of China's listed firms engaging in OFDI activity. Relying on mainstream corporate governance theories, Tobin's Q as a measure of firm performance, and patents granted as a measure of successful corporate innovation, this study leverages data collected from the State Intellectual Property Office of China, the Chinese Research Data Services Platform as well as the China Stock Market & Accounting Database. Our sample includes 3,337 firms with a total 13,182 firm-year observations from the year 2010 to 2019, divided in two panel datasets including 6,581 firm-year observations for China listed firms engaging in OFDI, and 6,601 firm-year observations for China listed firms not engaging in OFDI. We find that board independence is the corporate governance component with the highest predictive significance on innovation, followed by board size, and that CEO duality is not a significant innovation predictor for China listed firms. We also find high incidence of CEO duality among China listed firms, although less frequent for firms engaging in OFDI, and that China listed firms that engage in OFDI activity are more innovative.