Can Board Members with Foreign Experience Help to Deliver Financial Reports?

Abstract

We test whether diversity on corporate boards helps to increase the quality of financial reporting. In particular, we focus on members with foreign experience (EFE) sitting on boards and audit committees (ACs), and study how their presence as directors or members of AC enhances the timeliness of financial reporting. The results show that EFEs can effectively improve board's efficiency and result in increased timeliness of reporting. Our findings, therefore, support the theoretical assumptions of selective adaptation theory by showing that companies translate an alien concept to local conditions and welcome the benefit of having an EFE on board. This study makes its core contribution by empirically showing that an EFE on boards and AC have implications for financial reporting quality. The results may be potentially helpful for supervisory bodies as well as regulators as they provide an insight on how the presence of EFEs influences financial reporting timeliness.