National Culture, Cross-Listing, CEO Turnover and Sensitivity to Performance

Abstract

I examine how cross-sectional differences in national culture dimensions affect the probability of CEO turnover and its sensitivity to firm performance after cross-listing by a non-U.S. firm in the United States. I find that three of the Hofstede indexes (long-term orientation, power distance, and uncertainty avoidance) are correlated with a lower probability of CEO turnover. I find for two of the three indexes that when a firm from a country with higher (lower) index than the United States cross-list in the United States, the firm becomes more (less) sensitive to negative performance in comparison with non-cross-listed firms from the same country. This outcome is associated with an increased (decreased) probability of CEO turnover. The two-way effect of the national culture of the host country (the United States) on cross-listed firms suggests that cultural exchange affects corporate culture and consequently influences relevant financial decisions.