The Roles of Subsidiary Boards in Multinational Enterprises

Yan Du, Marc Deloof and Ann Jorissen

Journal of International Management, 2015, vol. 21, issue 3, 169-181

Abstract: In recent years, shareholders, regulators, and academics have become increasingly interested in how multinational enterprises (MNEs) can ensure sound corporate governance throughout all entities within a firm. One important mechanism available to MNEs for improving their global governance is the subsidiary board of directors. However, to date scant academic research has focused on the roles of subsidiary boards and the factors that influence their involvement in different roles. Using survey data from a sample of MNE subsidiaries operating in Belgium with headquarters in 14 different countries, we find that a subsidiary board performs four roles: control, strategy, coordination, and service. Further, a subsidiary board is more involved in control, strategy, and service roles if the subsidiary operates only in the local market, independently from the headquarters (the local implementer subsidiary). In particular, the board of the local implementer subsidiary is more involved in strategy and coordination roles when more directors are headquarters country nationals. Our findings collectively suggest that the subsidiary board facilitates a subsidiary's pursuit of its strategic objective and helps to manage the headquarters–subsidiary agency problem. Moreover, subsidiary directors' characteristics influence the subsidiary board's ability to perform its roles.

Keywords: Corporate governance; Roles of subsidiary boards of directors; Multinational enterprise; Control mechanisms (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1075425315000216
Full text for ScienceDirect subscribers only

Related works:
Working Paper: The Roles of Subsidiary Boards in Multinational Enterprises (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:intman:v:21:y:2015:i:3:p:169-181

Ordering information: This journal article can be ordered from
http://www.elsevier.com/wps/find/journaldescription.cws_home/601266/bibliographic
http://www.elsevier. ... 601266/bibliographic

DOI: 10.1016/j.intman.2015.05.001

Access Statistics for this article

Journal of International Management is currently edited by M. Kotabe

More articles in Journal of International Management from Elsevier
Bibliographic data for series maintained by Catherine Liu ().