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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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Cited by:
  1. 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.
  2. Kim, Incheol & Pantzalis, Christos & Park, Jung Chul, 2013. "Corporate boards' political ideology diversity and firm performance," Journal of Empirical Finance, Elsevier, Elsevier, vol. 21(C), pages 223-240.
  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. 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.
  5. MORIKAWA Masayuki, 2014. "What Types of Company Have Female and Foreign Directors?," Discussion papers 14032, Research Institute of Economy, Trade and Industry (RIETI).
  6. Piekkari, Rebecca & Oxelheim, Lars & Randøy, Trond, 2013. "The Role of Language in Corporate Governance: The Case of Board Internationalization," Working Paper Series, Research Institute of Industrial Economics 974, Research Institute of Industrial Economics.
  7. 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.
  8. Masayuki Morikawa, 2014. "What Types of Companies Have Female and Foreign Directors?," AJRC Working Papers, Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University 1404, Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University.
  9. Brickley, James A. & Zimmerman, Jerold L., 2010. "Corporate governance myths: Comments on Armstrong, Guay, and Weber," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 50(2-3), pages 235-245, December.
  10. 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.
  11. 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, Elsevier, vol. 50(2-3), pages 179-234, December.
  12. 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.

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