Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 567: The Impact of Foreign Board Membership on Firm Value

Lars Oxelheim () and Trond Randøy ()
Additional contact information
Lars Oxelheim: The Research Institute of Industrial Economics, Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden
Trond Randøy: Agder University College, Postal: School of Business and Economics, Serviceboks 422, Bygg H, N-4604 Kristiansand, Norway

Abstract: This study examines the effect of foreign (Anglo-American) board membership on corporate performance measured in terms of firm value (Tobin’s Q). On a basis of firms with headquarters in Norway or Sweden the study indicates a significantly higher value for firms that have outsider Anglo-American board member(s), after a variety of firm-specific and corporate governance related factors have been controlled for. We argue that this superior performance reflects the fact that these companies have successfully broken away from a partly segmented domestic capital market by “importing” an Anglo-American corporate governance system. Such an “import” signals a willingness on the part of the firm to expose itself to improved corporate governance and enhances its reputation in the financial market.

Keywords: Foreign Board Membership; Corporate Governance; Board Monitoring; Cross-Listing

JEL-codes: F36; G30; G32

37 pages, December 10, 2001

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