Board composition and subsidiary risk: an exploratory study

Abstract

PurposeThis paper aims to explore the association between firm subsidiary risk and the board composition attributes of international experience, government experience and independence (outsiders).Design/methodology/approachWe sample the directors of the 104 largest European and US service and industrial firms by market capitalization as listed in the Financial Times (FT) Global index of 2008 using a cross-sectional design with data from 2009-2011.FindingsInternational experience increases and government experience decreases firm subsidiary risk.Research limitations/implicationsOur subsidiary data are limited to the number of subsidiaries per country and not to other potentially valuable information like size, number of employees or even board composition at the subsidiary levels. Additionally, the use of a diversified US and European firm could add unnecessary variance due to different contexts involved in 104 firms.Practical implicationsThe desired level of firm subsidiary risk could be influenced by modifying the profile of board members.Originality/valueThis is one of the first studies to analyze the influence of board composition and risk at the firm level. Risk is a variable closely associated to internationalization.