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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.

Suggested Citation

  • Masulis, Ronald W. & Wang, Cong & Xie, Fei, 2012. "Globalizing the boardroom—The effects of foreign directors on corporate governance and firm performance," Journal of Accounting and Economics, Elsevier, vol. 53(3), pages 527-554.
    • Handle: RePEc:eee:jaecon:v:53:y:2012:i:3:p:527-554
    DOI: 10.1016/j.jacceco.2011.12.003
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    More about this item

    Keywords

    Foreign directors; Board meeting attendance; Earnings restatement; Cross-border acquisition; CEO compensation; CEO turnover; Firm performance;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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