The Role of Corporate Board Diversity in Mitigating Supply Chain Disruptions: The Impact of Foreign Nationals

34 Pages Posted: 10 May 2022

See all articles by Musa Subasi

Musa Subasi

University of Maryland-College Park - Robert H. Smith School of Business

Ariel Rava

University of Maryland - College Park, Robert H. Smith School of Business

Rohan D'Lima

Oregon State University

Date Written: May 4, 2022

Abstract

We explore the role of foreign directors in mitigating the effects of supply chain disruptions caused by economic policy uncertainty (EPU) spikes in their home countries. Using a large sample of global supply chain relationships of US manufacturing firms, we show that the likelihood of a US buyer having a foreign director from a given supplier country increases with that country’s EPU. Furthermore, EPU spikes in a supplier country are associated with significantly lower sales and firm value for the supplier’s US buyers; however, these effects are mitigated when the buyer has a foreign national from that country on its board of directors. Our cross-sectional tests suggest that the impact of foreign nationals in mitigating the effects of supply chain disruptions is more pronounced for firms that are smaller in size, highly leveraged, and financially distressed and have lower cash holdings. Taken together, our results highlight the benefits of foreign national members of corporate boards, particularly for firms with significant dependence on foreign suppliers.

Keywords: foreign nationals, corporate boards, economic policy uncertainty, supply chain disruptions

JEL Classification: G10, G30, J15

Suggested Citation

Subasi, Musa and Rava, Ariel and D'Lima, Rohan, The Role of Corporate Board Diversity in Mitigating Supply Chain Disruptions: The Impact of Foreign Nationals (May 4, 2022). Available at SSRN: https://ssrn.com/abstract=4100754 or http://dx.doi.org/10.2139/ssrn.4100754

Musa Subasi (Contact Author)

University of Maryland-College Park - Robert H. Smith School of Business ( email )

University of Maryland-College Park
4332N Van Munching Hall
College Park, MD 20742
United States
301-314-1055 (Phone)

Ariel Rava

University of Maryland - College Park, Robert H. Smith School of Business ( email )

Rohan D'Lima

Oregon State University ( email )

Bexell Hall 200
Corvallis, OR 97331
United States

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