The Influence of Business Groups on Board Composition in Offshore Financial Multinational Enterprises

Hearn, B., L. Oxelheim, and T.Randoy: The influence of business groups on board composition in offshore financial multinational enterprises, International Business Review 2022. https://doi.org/10.1016/j.ibusrev.2022.102084

17 Pages Posted: 19 Dec 2022

See all articles by Bruce Allen Hearn

Bruce Allen Hearn

University of Southampton; University of Bradford - School of Management

Lars Oxelheim

Research Institute of Industrial Economics (IFN); University of Agder; Lund University

Trond Randoy

Copenhagen Business School - Department of Accounting

Date Written: December 5, 2022

Abstract

Based on resource dependence theory we argue for an influence of business groups (BGs) on the board composition of constituent offshore financial multinational enterprises (FMNEs). Using a unique sample of 171 Caribbean FMNEs in an inter-island BG setting, we find BGs’ control in constituent firms to be indicative of the importance of the internal financing and intermediation within the group network. This control leads to a higher proportion of lawyers hired to the boards of directors in BG-constituent firms and supports the argument that lawyers provide skills in complex offshore regulatory frameworks that facilitate BGs’ optimal tax management. Furthermore, we observe that an increased adoption of shareholder rights governance by BG-constituent firms is associated with increased engagement with outside resource providers, increased potential conflicts of interest and hence a need for hiring more lawyers. Our interpretation is that offshore FMNEs have a need for more lawyers, whose legal skill is critical to the competitive advantage of FMNEs.

Keywords: Offshore Financial MNE, Tax Havens, Offshore, Business Groups, Institutions, Caribbean

JEL Classification: G02, G15, G34, M14, M38

Suggested Citation

Hearn, Bruce Allen and Oxelheim, Lars and Randoy, Trond, The Influence of Business Groups on Board Composition in Offshore Financial Multinational Enterprises (December 5, 2022). Hearn, B., L. Oxelheim, and T.Randoy: The influence of business groups on board composition in offshore financial multinational enterprises, International Business Review 2022. https://doi.org/10.1016/j.ibusrev.2022.102084, Available at SSRN: https://ssrn.com/abstract=4293809

Bruce Allen Hearn (Contact Author)

University of Southampton ( email )

University Rd.
Southampton SO17 1BJ, Hampshire SO17 1LP
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University of Bradford - School of Management ( email )

Emm Lane
Bradford, West Yorkshire Bd9 4JL
United Kingdom

Lars Oxelheim

Research Institute of Industrial Economics (IFN) ( email )

P.O. Box 55665
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Sweden
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University of Agder ( email )

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Norway

Lund University ( email )

P.O.Box 7080
S-220 07 Lund
Sweden
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Trond Randoy

Copenhagen Business School - Department of Accounting ( email )

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