The Impact of Internationalization of the Boardroom on Capital Structure

摘要

We develop a theoretical model based on several theories, mainly pecking order theoryand theory of information economics, as well as on theoretical arguments provided by economicsociology and psychology to investigate for the first time the impact of the presence of a foreignboard member on capital structure. The sample of study covers 3773 non-financial U.S. firms andincludes 23,196 observations over the period from 2010 to 2018. We used pooled OLS, fixed effects,random effects, and the general method of moments (GMM) in order to analyze the impact of foreigndirectors on capital structure after controlling for a range of factors, including size, year, and industryeffects. Theresultsofthisempiricalanalysissupporttheproposedhypothesis. Ofparticularnoteisthefinding that the proportion of foreign directors on the board correlates negatively with debt structure.Furthermore, we demonstrate that our findings hold up in the face of all appropriate robustnesschecks. Our study contributes to the existing literature by including an international dimension ofboard diversity, specifically the influence of foreign directors on corporate capital structure. We arguethat increasing international diversity in the boardroom improves both the quantity and quality of theinformation exchange between insiders and shareholders, thereby reducing adverse selection costs.