2021 Fiscal Year Final Research Report
Effects of foreign directors on firm performance: Evidence from Japan.
| Project/Area Number |
19K13744
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| Research Category |
Grant-in-Aid for Early-Career Scientists
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| Allocation Type | Multi-year Fund |
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| Review Section |
Basic Section 07060:Money and finance-related
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| Research Institution | Waseda University |
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Principal Investigator |
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| Project Period (FY) |
2019-04-01 – 2022-03-31
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| Keywords | Foreign directors / Corporate governance / Firm performance / Japan |
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| Outline of Final Research Achievements |
This paper examines the effects of foreign directors on firm performance using panel data of nonfinancial listed firms in Japan from 2004 to 2015. We find that the relationship between foreign directors and firm performance is generally not strong. While the market appears to react positively to the first introduction of a foreign director, the returns are not statistically significant. The first introduction of a foreign director is significantly associated with changes in ownership structure or business strategy aimed at expanding overseas business and strengthening corporate governance. Nevertheless, we also obtain no evidence that the first appointment of a foreign director improves firm performance.
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| Free Research Field |
Corporate governance
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| Academic Significance and Societal Importance of the Research Achievements |
This research fills the research gap by examining the effects of foreign directors on firm performance in a bank-based economy, stakeholder corporate model. It hence acts as meaningful references to investors, corporate executives, and policymakers adjusting diversity policies.
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