Directors with foreign experience and employee protection

Abstract

This study investigates the impact of managerial foreign experience on corporate employee protection. Using 30,644 firm-year observations from 3972 Chinese listed firms from 2008 to 2020, I find that compared with firms without returnee directors, firms with returnee directors pay more social insurance premiums and implement better employee treatment policies. The positive relationship is stronger when returnee directors acquire foreign work experience (as opposed to educational experience), gain experience in countries with strong labor protection, serve as a CEO or a chairperson in the Chinese firm, and have high media visibility. The cross-sectional analysis shows the effect of directors with foreign experience on employee protection is greater in non-state-owned firms, and returnee directors improve employee protections more when the employees have relatively weak discourse power. Additional analysis finds that returnee directors improve employee training and occupational safety, and they help balance social insurance generosity and employment levels. The results are robust after addressing the potential endogeneity problems. My results suggest a potential way to transfer better labor protection practices from developed to emerging markets.