Globalizing the Boardroom - The Effects of Foreign Directors on Corporate Governance and Firm Performance
Ronald W. Masulis
University of New South Wales - Australian School of Business; European Corporate Governance Institute (ECGI); Financial Research Network (FIRN)
The Chinese University of Hong Kong (CUHK) - Department of Finance
July 12, 2011
Journal of Accounting & Economics (JAE), Forthcoming
AFA 2011 Denver Meetings Paper
ECGI - Finance Working Paper No. 242/2009
We examine the benefits and costs associated with foreign independent directors (FIDs) at U.S. corporations. We find that firms with FIDs make better cross-border acquisitions when the targets are from the home regions of FIDs. However, FIDs also display poor board meeting attendance records, and firms with FIDs are more prone to commit intentional financial misreporting and overpay their CEOs and have lower CEO turnover sensitivity to performance. Finally, firms with FIDs are associated with significantly poorer performance, especially as their business presence in the FID’s home region becomes less important.
Number of Pages in PDF File: 69
Keywords: Foreign Director, Board of Directors, Corporate Governance, Independent Director, Foreign Independent Director, Agency Costs, Board Monitoring, Cross-Border Acquisition, Earnings Restatement, Financial Misreporting, CEO Compensation, Board Attendance, Operating Performance, Tobin's Q
JEL Classification: G34Accepted Paper Series
Date posted: March 19, 2010 ; Last revised: January 8, 2012
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