 Overcoming the liability of origin by hiring foreign independent directors: Evidence from Chinese firms' cross-border M&AsLin Yu, Tao Bai, Jingwei Yin and Xue Tan Journal of World Business, 2024, vol. 59, issue 2 Abstract: Firms from countries with weak corporate governance institutions tend to face liability of origin when they conduct cross-border mergers and acquisitions (M&As). We argue that they can overcome such challenges through hiring foreign independent directors (FIDs) as it can signal their commitments and efforts to align with international corporate governance standards. Based on a sample of Chinese listed firms between 2004 and 2017, we find that the FIDs have a positive impact on the likelihood of achieving cross-border M&As. Our mechanism tests show that FIDs could indeed facilitate firms' cross-border M&As through enhancing corporate governance practices as reflected by the adoption of Big 4 auditors and lower analyst forecasting errors. Moreover, the positive impact of FIDs is stronger for firms with higher state ownership, but weaker for firms with higher foreign ownership. Our findings are robust across a set of additional analyses. Keywords: Foreign independent director; Cross-border M&As; Liability of origin; Corporate governance; Ownership (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:worbus:v:59:y:2024:i:2:s109095162400004x Ordering information: This journal article can be ordered from DOI: 10.1016/j.jwb.2024.101520 Access Statistics for this article Journal of World Business is currently edited by David Collings and Jonathan Doh More articles in Journal of World Business from Elsevier |
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