Proceedings of Annual Shanghai Business, Economics and Finance Conference 3 - 4 November 2014, Shanghai University of International Business and Economics, Shanghai, China ISBN: 978-1-922069-63-4 Soft Information and Local Independent Directors Shangzhou ji How can the independent directors play the role of monitoring and advising? Some scholars attach much importance to independence. Others argue that information acquisition is extremely important to the outside directors. Except the hard information which can be easily got from many sources the soft information is crucial to the outside directors, which can only be acquired from personal observation or face-toface interactions. The CEO controls the source of soft information and has the incentive to use the information strategically. The independent directors have to be affiliate with CEO to get more soft information, which will be harmful to the independence and monitoring efficiency. The local independent directors have the advantage to communicate with CEO and can acquire the soft information from different sources. So we think local independent director is the only one who can get the soft information and does not need to sacrifice his independence. With more local independent directors the monitoring and advising efficiency should be improved significantly. With a sample of more than 1400 listed companies from Guotai’an, we use Heckman Selection Model to study the relation between M&A decision and the number of local independent directors. We get the significant result which shows the local independent directors has negative relation with the amount and frequency of M&A, especially in the SOEs. Key Words: Soft Information; Independence; Monitoring and Advising Efficiency ________________ Shangzhou ji, Shanghai University of International Business and Economics, China. Sponsored by the National Social Science Fund Project(12BGL003), Research Innovation Key Project(12ZS170), and Key Discipline Project (J512-01) of Shanghai Municipal Commission of Education.