Does It Pay to Go Global in the Boardroom? The Effect of Foreign Directors on Corporate Governance and Performance

Does It Pay to Go Global in the Boardroom? The Effect of Foreign Directors on Corporate Governance and Performance

Ronald Masulis, Cong Wang, Fei Xie

Series number :

Serial Number: 
242/2009

Date posted :

November 01 2009

Last revised :

SSRN Share

Keywords

  • Corporate governance • 
  • boards of directors • 
  • foreign directors.

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 firms with FIDs are more prone to commit intentional financial misreporting and overpay their CEOs and have lower CEO turnover sensitivity to performance. Finally, firms with FIDs are associated with significantly poorer performance, especially as their business presence in the FID’s home region becomes less important.

Authors

Research Member
School of Banking and Finance, Australian School of Business
Real name: 
Cong Wang
Real name: 
Research Member
University of Delaware, Lerner College of Business and Economics