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Diverse boards: Why do firms get foreign nationals on their boards?

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  • Estélyi, Kristína Sághy
  • Nisar, Tahir M.

Abstract

Corporate boards are the focal points for strategy and investment related firm decisions, and hence they embody the key features of production and management. In this paper, using a unique dataset of listed firms, we examine the determinants of board diversity based on directors' nationalities and ask whether the presence of foreign directors on boards contributes in some way to firm governance and performance. Our results show that boards containing diverse nationalities are positively and significantly associated with shareholder heterogeneity and the firm's international market operations. Nationality diversity is also positively related to operating performance. Moreover, as we find, institutions relating to investor engagement play an important role in influencing the nature and consequences of board diversity.

Suggested Citation

  • Estélyi, Kristína Sághy & Nisar, Tahir M., 2016. "Diverse boards: Why do firms get foreign nationals on their boards?," Journal of Corporate Finance, Elsevier, vol. 39(C), pages 174-192.
    • Handle: RePEc:eee:corfin:v:39:y:2016:i:c:p:174-192
    DOI: 10.1016/j.jcorpfin.2016.02.006
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    More about this item

    Keywords

    Director nationality; Diversity; Institutions; Shareholder heterogeneity; Board governance; Performance;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination

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