Nominee directors on the board and internationalization strategy: An institutional agency perspective

Extant literature on Corporate Governance predominantly examines the characteristics of Anglo-Saxon system of corporate governance. Hence, studies examining governance of firms often employ the agency theory. However, recent studies argue that the behaviour of principals and agents is shaped by the institutional logics and consequently Anglo-Saxon institutional logic based agency theory may not be applicable in other contexts. Hence, studies examined the role of institutions in shaping various actors and the decisions of the firms. In this study, we examine a specific feature in the Indian Corporate Governance context i.e., nominee directors on the board. On a sample of 764 unique firms and 4216 firm year observations spanning the period 2006-2017, we find that the nominee directors are negatively associated with internationalization of emerging economy firms. In addition, we also find that the nominee directors positively moderate the relationship between family ownership and internationalization whereas it negatively moderates the relationship between foreign institutional investors and banks on the international investments of emerging economy firms. In this manner, we contribute to the institutional agency theory by arguing that institutional logics shape the internationalization decisions of emerging market firms.