Manuscript Type: EmpiricalResearch Question/ Issue: To what extent can group faultlines and their potential valuedestroying effects be detected on corporate boards? Task-related attributes of the type of directorship, education, board tenure and financial background of board members are considered as directors' characteristics that give rise to the faultline phenomenon. The impact of task-related faultlines on firm performance as well as the moderating effects of busy boards, Chief Executive Officer (CEO) tenure, executive directors' (EDs) compensation structure, and the average nonexecutive directors' (NEDs) involvement in board committees are examined. Research Findings/ Insights: Using a panel of FTSE 350 companies from 1999 to 2008, we find a strong negative effect of task-related faultlines on firm performance. Further exploration of the moderating effects demonstrates that the condition of a busy board and the CEO tenure exacerbate the negative effects of faultlines. At the same time, the executive pay-contingency is found to have a remedying effect on boardroom cohesiveness, whereas the involvement of NEDs in board committee work is not likely to make the adverse effects of board faultlines less pronounced. Theoretical/ Academic Implications: Based on the arguments of the identity and social identity theory, this study shows that task-related faultlines on corporate boards have strong negative value-creating implications. The positive moderating impact of the executive compensation structure renders support to agency theory predictions about executive incentive alignment. This work also underlines the usefulness of the concept of faultlines in the corporate governance literature, because the unitary boards, where NEDs and EDs come to work together, exhibit preexisting factions, similar to top management teams of family-controlled firms and teams managing international joint-ventures. Practitioner/Policy Implications: This research points to the importance of the careful selection process of directors by the nomination committees. It also underlines the role for active leadership on boards, who should be aware of available strategies to ameliorate the negative consequences of board splits, such as accentuating superordinate board identity and/ or informal meetings. words

Manuscript Type: Empirical Research Question/Issue: The global financial crisis in 2008 has generated increasing recognition of the importance of board diversity reflected amidst the capabilities and skills of directors on a board. As the primary institutional mechanism designed to strengthen the director selection process, nomination committees (NCs) occupy centre stage of this discussion. However, there is a dearth of studies which focus either specifically on NCs or on diversity as a board composition outcome. In this study, we examine the research question of the likely antecedents in terms of NC characteristics of two board composition outcomes, i.e., diversity as variety in terms of gender and nationality, and diversity as separation in terms of a board demographic faultline. Research Findings/Insights: For a panel of FTSE350 companies from 1999 to 2008, we find that the increasing presence on the NC of females or non‐British nationals is likely to have a positive impact on the level of board gender and nationality diversity, respectively. In addition, we report that the presence of the chief executive officer (CEO) on the NC is found to interact with the NC independence, as a result of which a board demographic faultline is likely to emerge. Theoretical/Academic Implications: We bring together three concepts from social psychology research to create the theoretical basis for our study of the influence of NCs on board diversity: these are similarity‐attraction, homosocial reproduction, and social identity. The strong empirical findings suggest that these socio‐psychological dimensions are applicable to the operations of NCs, which has implications for the outcomes of the director nomination and selection process, and consequently also for board composition. Practitioner/Policy Implications: Our research indicates that NC characteristics are significant antecedents of board diversity, hence composition of the NC is an important step and pre‐requisite for assembling a diverse board. For example, appointing females and/or non‐nationals to the NC increases the likelihood of greater representation of females and/or non‐nationals on the entire board. At the same time, our evidence suggests that the presence of the CEO amidst the majority of non‐executive directors (NEDs) on the NC is detrimental for board cohesiveness.

1 We should like to express our gratitude to ESRC for funding this research under grant number RES: 062-23-0782 (2008-2011) and to our colleague, Tim Miller, for his skilful assistance during the data processing stage. Interlocking directorships and firm performance… 2Interlocking directorships and firm performance in the highly regulated sectors: The moderating impact of board diversity ABSTRACTInterlocking directorships are a pervasive element of the corporate landscape. Academic literature documents many examples of spreading business practices and strategic outcomes through this form of inter-organizational connectedness. Yet, the findings on the long debated relationship between interlocking ties and firm performance remain mixed. In this study, we provide an analysis of this relationship on the basis of a sample of UK-listed financial and utility companies across a ten year period. Our findings provide support to the busyness hypothesis of interlocking and indicate that when used in excess, interlocking is likely to compromise the attention of directors on the focal company board. Moreover, in reconciliation of the competing views of the resource-dependence and agency theory, we propose a contingency-based model of interlocking with board diversity as a moderator of the baseline interlocking-firm performance relationship. Our results render support to the assertion that the potential for dissemination of ideas and innovations resides in the interlocking ties. However, boards need to be receptive to that knowledge exchange for this transfer to take place and this process may be facilitated by the level of and changes in board diversity. This study contributes to research into the consequences and implications of interlocking directorships and demonstrates that the search for the moderating and mediating variables represents a step in the right direction. words

This paper examines the source country determinants of FDI into Japan. The paper highlights certain methodological and theoretical weaknesses in the previous literature and offers some explanations for hitherto ambiguous results. Specifically, the paper highlights the importance of panel data analysis, and the identification of fixed effects in the analysis rather than simply pooling the data. Indeed, we argue that many of the results reported elsewhere are a feature of this mis-specification. To this end, pooled, fixed effects and random effects estimates are compared. The results suggest that FDI into Japan is inversely related to trade flows, such that trade and FDI are substitutes. Moreover, the results also suggest that FDI increases with home country political and economic stability. The paper also shows that previously reported results, regarding the importance of exchange rates, relative borrowing costs and labour costs in explaining FDI flows, are sensitive to the econometric specification and estimation approach. The paper also discusses the importance of these results within a policy context. In recent years Japan has sought to attract FDI, though many firms still complain of barriers to inward investment penetration in Japan. The results show that cultural and geographic distance are only of marginal importance in explaining FDI, and that the results are consistent with the market-seeking explanation of FDI. As such, the attitude to risk in the source country is strongly related to the size of FDI flows to Japan. Copyright 2007 The Authors Journal compilation 2007 Blackwell Publishing Ltd .

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