Research On The Economic Consequences Of Globalization Board

More and more foreigners are engaged as directors in Chinese corporates' board in the era of economic globalization,whom consist of the globalization board.Through hand collected data by identifying directors' nationality information provided in resumes from CSMAR,I find that about 6%corporate boards of the firm-year observations are globalization boards in Chinese list firms over the period of 2004-2014,and with a degree of board globalization of nearly 1%.Foreign directors and local directors have some differences in cultural and traditions,ethics and value,marketing concept,legal consciousness and so on.Consequently,globalization board may have effect on corporate decisions and governance.However,prior research on globalization board mainly focued on its impact on firm value,ignoring the path of how and why globalization board affect firm value.This paper empirically investigate the effect of globalization board on corporate strategy slection,capital structure adjustment and corporate risk-taking.Using firm level globalization board data,I have found that:(1)there is a significantly negative relationship between globalization board and industry diversity strategy,and a significantly positive relationship between globalization board and international diversity strategy.The findings also show that globalization board have significant effect on strategy selection in higher managerial power subsamples.The findings partly support the agency cost hypothesis of diversity strategy.Further,I classified foreign directors to foreign independent directors and foreign non-independent directors.I have found that foreign non-independent directors have a significant negative impact on industry diversity strategy,and a significant positive impact on international diversity strategy.Also,there is no impact of foreign independent directors on industry diversity strategy,but a significantly negative relationship of foreign independent directors on international diversity strategy.(2)I have found that globalization board accelerates capital structure adjust to target capital structure,and the positive effect are more pronounced in non-state owned subsamples and lower marketization subsamples.By classifing foreign directors to foreign independent directors and foreign non-independent directors,the results show that foreign non-independent directors have a significantly positive effect on capital adjustment,but find no significant relationship between foreign independent directors and capital structure adjustment.(3)Globalization board is sigrnificantly positively associated with firm risk-taking,and the effect of globalization board on risk-taking is pronounced in lower largest shareholders'ownership subsamples.Further tests show that there is a significantly positive relationship between foreign independent directors and risk-taking,and there is no significant relationship between foreign non-independent directors and risk-taking.Moreover,my findings show that higer risk-taking has positively affected firm performance and firm value.Overall,my research show that globalization board in Chinese listed firms have positive effects.Also,findings in this paper are helpful in improving governance and decision quality of board,and providing evidence for market supervision.My research contributes to the literature in several ways:firstly,based globalization board research on a transition economy,this study provide new evidence of globalization board.Secondly,my findings add to existing literature that globalization board have effect on corporate strategy selection,capital structure adjustment and risk-taking,enrich the research on globalization board.Last but not the least,I classify foreign directors as foreign independent directors and foreign non-independent directors,and find that foreign independent directors and foreign non-independent directors play different roles in corporate decision making and governance,which extands the research on globalization board.