Board Independence and Internationalization
Date Issued
2015
Date
2015
Author(s)
Shun, Chih-Chun
Abstract
This study uses U.S. firms as the sample to analyze the association between board independence and firm’s internationalization. We use foreign sales ratio, foreign asset ratio, geographic dispersion, and degree of internationalization as the measures for internationalization and employ the change in board independence regulation after 2001 as the exogenous shock on board composition. We partition the full sample into the compliance group, in which the firms already comply the board independence regulation and have more than 50% of independent directors on the board in 2000, and the non-compliance group, in which firms have less than 50% of independent directors on the board in 2000 but after the regulatory change, have more than 50% of independent directors on the board (since 2005). We then use difference-in-difference research design to examine whether board independence has any impact on corporate internationalization. We find that board independence continuously rises for both the compliance and non-compliance groups since 1997. In our empirical results, when foreign sales ratio is used as the measure for internationalization, the decline in internationalization is more pronounced for non-compliance firms than for compliance firms. Using foreign asset ratio, geographic dispersion, and the degree of internationalization as the measure for internationalization, we find no statistically significant relation between internationalization and board independence.
Subjects
Corporate Governance
Independent Director
Board Independence
Internationalization
Difference-in-Difference Approach
Type
thesis