Corporate Insiders’ Foreign Experience and the Disclosure of Letters to Shareholders

This paper examines whether and how corporate insiders’ foreign experience affects firms’ voluntary narrative disclosures. Utilizing the setting of selective issuance of letters to shareholders by Chinese listed firms, we document a positive association between insiders’ foreign experience and the likelihood of issuing such letters. Consistent with the notion that international exposure improves information quality, letters from firms with foreign-experienced insiders exhibit greater readability and a more neutral tone. Mechanism analysis suggests that firms use these letters to signal their intention to enter international markets. Cross-sectional analyses reveal that the positive relationship between insiders’ foreign experience and the likelihood of issuing a letter is more pronounced for firms with higher media coverage and investor attention. Finally, we find that the effect of foreign experience is stronger when the insiders hold senior management positions or possess financial expertise. Overall, these findings suggest that foreign experience is a significant determinant of disclosure practices regarding letters to shareholders in China. JEL classification: M41, G34