Board effectiveness and internalization benefits: Theory and evidence from value creation in cross-border acquisitions

Tao Han () and Xavier Martin
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Tao Han: EM - EMLyon Business School

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Abstract: We examine how the value created by technological and marketing intangible assets in foreign direct investment (FDI) varies with board effectiveness conditions. Synthesizing internalization and agency theories, we theorize that a firm can better leverage intangibles and create value through acquisitive FDI if its board setup enables effective monitoring and advising. Empirically, we operationalize the "quad" elements of board effectiveness—independence, expertise, bandwidth, and motivation—and account for multiple selectivity related to disclosure decisions and mode choice. Analyzing 675 cross-border acquisitions by U.S. public firms (1998–2016), we quasi-replicate and extend internalization results linking intangibles with abnormal returns upon FDI announcement. Advancing internalization research through corporate governance insights, our findings show that board effectiveness moderates the value-creating effects of intangibles in multinational enterprises' foreign expansion.

Keywords: board effectiveness; corporate governance; cross-border acquisitions; intangibles; internalization (search for similar items in EconPapers)
Date: 2025-05-09
Note: View the original document on HAL open archive server: https://hal.science/hal-05083051v1
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Published in Global Strategy Journal, 2025, FORTH, 40 p. ⟨10.1002/gsj.1524⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05083051

DOI: 10.1002/gsj.1524

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