Abstract
AbstractWe examine whether foreign chief executive officers (FCEOs) and foreign independent board chairpersons (FIBCs) improve on the corporate governance (CG) practices of emerging market multinational corporations (EMMNCs) through governance spill over. We use hand‐collected data for 80 listed Nigerian multinational corporations for the period 2011–2016 (480 firm‐years) and apply a three‐stage least squares regression to address endogeneity issues. Our findings show international exposure of EMMNCs motivate appointment of FIBCs and FCEOs who positively affect their CG quality. In addition, international board interlocks positively moderate the likelihood of FCEOs to export and enhance EMMNCs' CG quality, but negatively moderate FIBCs impact on CG practices of EMMNCs. Finally, we develop a framework to show how EMMNCs' CG practices are exemplary to local firms in the home country who may mimic these governance practices. We contend the repeated game of governance spill‐over and mimetic isomorphism drives the evolution of CG institutions and, potentially, will generate institutional change in CG practices in emerging markets.
Highlights
In response to the development of corporate governance (CG) regulatory standards in several developed countries (Cuomo, Mallin, & Zattoni, 2016; Khan, Al-Jabri, & Saif, 2019), many emerging economies have introduced mandatory or voluntary CG regulatory codes of practice (Cuomo et al, 2016; Machokoto, Areneke, & Ibrahim, 2020; Yamori, Harimaya, & Tomimura, 2017)
We examine whether foreign chief executive officers (FCEOs) and foreign independent board chairpersons (FIBCs) improve on the corporate governance (CG) practices of emerging market multinational corporations (EMMNCs) through governance spill over
Given the costs and benefits, the optimal CG practices of firms in emerging economies can either maintain or change governance institutions over time depending on the tradeoff between formal and unethical informal governance practices. Drawing on both institutional isomorphism and repeated game theorizing, we argue that the internationalization of EMMNCs poses as external coercion and influence on firm governance practices compared to firms operating only in one country
Summary
Before discussing our main theoretical positions in this research (i.e., institutional isomorphism and repeated game perspectives), we note that, the wider CG literature stems from a host of complementary theoretical standpoints (see., Gaur, Kumar, & Singh, 2014; Kumar & Zattoni, 2015). We contend that for FIBCs to effectively monitor implementation and diffusion of good CG practices in the home country of EMMNCs, they need other board members especially those with international interlocks to support adoption of isomorphic governance practices Given that such directors may be busy with boardroom commitments in other countries, this may limit their ability to attend board meetings. In cases where directors who seat on foreign boardrooms attend board meetings, they can assist FIBCs to improve and diffuse CG practices in the home country of EMMNCs. board international interlocks may have either a negative or positive moderating effect on the ability of FIBCs to impact on EMMNCs' governance quality which reduces (improves) the likelihood of governance isomorphism (see H3 on Figure 1). Continuous variables are winsorized at the first and 99th percentiles
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