Directors’ Human Capital, Firm Strategy, and Firm Performance
Journal of Management and Governance, DOI:10.1007/s10997-014-9304-y, Forthcoming
46 Pages Posted: 1 Jul 2011 Last revised: 23 Dec 2014
Date Written: December 23, 2014
Ideally, corporations are directed by boards whose directors provide valuable human capital that match the firms’ strategy. We investigate how directors’ human capital (international experience, industrial know-how, CEO experience, and financial know-how) affects firm performance including the firm’s strategy (diversification and internationalization) and how human capital is related to acquisition strategies (non-diversifying and international acquisitions). Our sample consists of 560 firm-year observations in Switzerland. We find empirical evidence that directors’ human capital affects firm performance and that this relationship depends on the firm’s strategy. Furthermore, human capital is also correlated with acquisition strategy. The study shows that focusing on board independence and compliance issues may be unrewarding in board research and practice.
Keywords: corporate governance; board of directors; resource dependence theory (RDT); agency theory; human capital; firm performance
JEL Classification: G30, G34, G38
Suggested Citation: Suggested Citation