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Globalizing the boardroom—The effects of foreign directors on corporate governance and firm performance

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  • Masulis, Ronald W.
  • Wang, Cong
  • Xie, Fei

Abstract

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 are associated with a greater likelihood of intentional financial misreporting, higher CEO compensation, and a lower sensitivity of CEO turnover to performance. Finally, firms with FIDs exhibit significantly poorer performance, especially as their business presence in the FID's home region becomes less important.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Accounting and Economics.

Volume (Year): 53 (2012)
Issue (Month): 3 ()
Pages: 527-554

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Handle: RePEc:eee:jaecon:v:53:y:2012:i:3:p:527-554

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Web page: http://www.elsevier.com/locate/jae

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Keywords: Foreign directors; Board meeting attendance; Earnings restatement; Cross-border acquisition; CEO compensation; CEO turnover; Firm performance;

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References

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Citations

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Cited by:
  1. MORIKAWA Masayuki, 2014. "What Types of Company Have Female and Foreign Directors?," Discussion papers 14032, Research Institute of Economy, Trade and Industry (RIETI).
  2. Sandra Cavaco & Edouard Challe & Patricia Crifo & Antoine Rebérioux & Gwenael Roudaut, 2014. "Board independence and operating performance: Analysis on (French) company and individual data," EconomiX Working Papers 2014-2, University of Paris West - Nanterre la Défense, EconomiX.
  3. Artiga González, Tanja & Schmid, Markus & Yermack, David, 2013. "Smokescreen: How Managers Behave When They Have Something to Hide," Working Papers on Finance 1309, University of St. Gallen, School of Finance.
  4. van Veen, Kees & Sahib, Padma Rao & Aangeenbrug, Evelien, 2014. "Where do international board members come from? Country-level antecedents of international board member selection in European boards," International Business Review, Elsevier, vol. 23(2), pages 407-417.
  5. Drobetz, Wolfgang & von Meyerinck, Felix & Oesch, David & Schmid, Markus, . "Is Board Industry Experience a Corporate Governance Mechanism?," Working Papers on Finance 1401, University of St. Gallen, School of Finance.
  6. Humphery-Jenner, Mark & Suchard, Jo-Ann, 2013. "Foreign VCs and venture success: Evidence from China," Journal of Corporate Finance, Elsevier, vol. 21(C), pages 16-35.
  7. Piekkari, Rebecca & Oxelheim, Lars & Randøy, Trond, 2013. "The Role of Language in Corporate Governance: The Case of Board Internationalization," Working Paper Series 974, Research Institute of Industrial Economics.
  8. Brickley, James A. & Zimmerman, Jerold L., 2010. "Corporate governance myths: Comments on Armstrong, Guay, and Weber," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 235-245, December.
  9. Kim, Incheol & Pantzalis, Christos & Park, Jung Chul, 2013. "Corporate boards' political ideology diversity and firm performance," Journal of Empirical Finance, Elsevier, vol. 21(C), pages 223-240.
  10. Fang, Yiwei & Francis , Bill & Hasan, Iftekhar, 2012. "More than connectedness – Heterogeneity of CEO social network and firm value," Research Discussion Papers 26/2012, Bank of Finland.
  11. Masayuki Morikawa, 2014. "What Types of Companies Have Female and Foreign Directors?," AJRC Working Papers 1404, Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University.
  12. Armstrong, Christopher S. & Guay, Wayne R. & Weber, Joseph P., 2010. "The role of information and financial reporting in corporate governance and debt contracting," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 179-234, December.

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