How does interpersonal justice affect outside directors’ governance behavior? A cross-cultural comparison

Abstract

We examine the impact of interpersonal justice among outside directors on the board and between a director and the CEO regarding the director’s monitoring and resource provision behaviors in different cultural contexts. We argue that directors from individualistic countries are more influenced by CEO interpersonal justice while directors from collectivistic countries are more affected by the board interpersonal justice. Our main effect results indicate that interpersonal justice with board members is positively related to both monitoring and resource provision by a director, while CEO interpersonal justice is related only to resource provision. Our results also show different effects on the director’s behaviors between three countries, i.e., Canada, Singapore, and Spain. We found that CEO interpersonal justice is positively associated with resource provision in Canada, while board interpersonal justice is positively related to both monitoring and resource provision in Singapore and Spain. These results suggest that directors discharge their board duties differently by how they are treated by other directors and the CEO and that their governance behaviors vary by culture. This study contributes to the literature on comparative corporate governance by showing the differences in directors’ behaviors in different cultural contexts.