The effect of corporate governance on voluntary delisting in China: The moderating role of top management team demographic characteristics

Limited literature investigates voluntary delisting issues in the context of China, even though China is the second-largest economy in the world. This study aims to investigate the influence of internal corporate governance（i.e., board size, board independence, CEO duality, institutional ownership, insider ownership) and external corporate governance (i.e., lead security trader, external auditor) on voluntary delisting. It also investigates the moderating effect of the top management team (TMT) demographic characteristics (i.e., TMT average age, TMT average education level, TMT political background) on the relationship between internal corporate governance and voluntary delisting. The study employed the Agency theory as the underpinning theory with two supporting theories: CBA theory and Upper Echelons theory. The data is collected from China’s New Third Board Market. It is an out-to-counter stock market that has had a large number of delisting firms recently. The sample includes 1045 delisted firms as a test group and 1388 remaining listed firms as the control group over the year from 2014 to 2019. Logistic regression and hierarchical regression analysis are used to achieve the research objectives. The findings show that board independence, institutional ownership, and insider ownership are significantly and negatively related to voluntary delisting. However, CEO duality, lead security trader, and external auditor are significantly and positively associated with voluntary delisting. Thus, good corporate governance could mitigate the likelihood of a firm voluntarily delisting. Furthermore, the results show that TMT demographic characteristics affect the relationship between internal corporate governance and voluntary delisting. Therefore, the contribution of this study includes expanding the application of the Upper Echelons theory in delisting literature, providing new evidence for the delisting empirical research, and offering suggestions for regulators of China’s capital market, investors, and the NTBM-listed firms’ management.