A Multinational Study of Foreign Directors on Non-U.S. Corporate Boards
Mihail K. Miletkov
University of New Hampshire - Paul College of Business and Economics
Annette B. Poulsen
University of Georgia - Department of Banking and Finance
M. Babajide Wintoki
University of Kansas - School of Business
March 15, 2012
Using a panel data set of more than 60,000 firm-years from 80 non-U.S. countries, we examine the determinants of the presence of foreign directors on corporate boards, as well as the impact such directors have on firm performance. Within countries, we find that larger firms, with significant foreign operations, including cross-border acquisitions, are more likely to have foreign directors. Firms also appear to use foreign directors to attract foreign shareholders. Across countries, we find that foreign directors are more likely to be found in countries with a lower supply of qualified potential directors. After accounting for potential endogeneity we find that, on average, foreign directors are associated with lower operating performance. However, this negative relation is largely concentrated in the countries with the highest quality legal institutions and is mitigated in firms with foreign sales, and when the foreign director comes from a country that is geographically close, has a similar culture and language, or has better developed capital markets and higher quality legal institutions than the firm's host country.
Number of Pages in PDF File: 51
Keywords: boards of directors, international governance, corporate governance
JEL Classification: G34, G30working papers series
Date posted: March 20, 2012 ; Last revised: July 11, 2013
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