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Effects of dialect connectedness between chairperson and CEO on corporate innovation in China

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  • Song, Chen
  • Chen, Leqin

Abstract

This paper examines the effects of dialect connectedness between the chairperson and CEO (DCCC) on corporate innovation activities. We find a negative association between DCCC and corporate innovation for China's listed firms. This negative relationship is more pronounced when the chairperson and CEO work in a different dialect-spoken city. Regarding corporate nature, we observe clear restrictions of DCCC on the innovation activities of non-state-owned enterprises, whereas the innovation of state-owned enterprises is less affected. We further investigate three mechanisms through which DCCC reduces corporate innovation. Our results suggest that DCCC restrains innovation by strengthening perceptions and trust between the chairperson and CEO and weakening the supervisory role of the chairperson. Further analysis indicates that emotional closeness between the chairperson and CEO cannot restrain corporate innovation in the short term if the CEO is pressured to be fired. In other words, DCCC cannot mitigate CEO career concerns within a short period.

Suggested Citation

  • Song, Chen & Chen, Leqin, 2023. "Effects of dialect connectedness between chairperson and CEO on corporate innovation in China," Global Finance Journal, Elsevier, vol. 57(C).
    • Handle: RePEc:eee:glofin:v:57:y:2023:i:c:s1044028323000315
    DOI: 10.1016/j.gfj.2023.100836
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    JEL classification:

    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • Z1 - Other Special Topics - - Cultural Economics

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