Does the Location of Directors Matter? Information Acquisition and Board Decisions

Alam, Zinat S.; Chen, Mark A.; Ciccotello, Conrad S.; Ryan, Harley E.

doi:10.1017/s002210901400012x

Cited by 120 publications

(32 citation statements)

References 77 publications

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“…One potentially critical dimension of board diversity is directors' geographical proximity. Directors' geographical proximity has been explored in only few studies, most likely due to a lack of data about the residences of directors (Alam et al, 2013(Alam et al, , 2014(Alam et al, , 2018. This aspect may be even more important than gender and ethnicity, because many firms are now seeking directors who live far away from their headquarters.…”

Section: Directors' Attributes and Their Monitoring Effectivenessmentioning

confidence: 99%

“…This aspect may be even more important than gender and ethnicity, because many firms are now seeking directors who live far away from their headquarters. Corporate expansion and globalization underlie the shift, but also improvements in technology and transportation that, in turn, allow directors to perform their duties even if they do not live in proximity to a firm (Alam et al, 2014). Moreover, geographical proximity may affect other demographic dimensions, such as gender and ethnicity.…”

Section: Directors' Attributes and Their Monitoring Effectivenessmentioning

confidence: 99%

“…Moreover, geographical proximity may affect other demographic dimensions, such as gender and ethnicity. The reason is that this dimension is directly related to the information accessible to directors, which, in turn, may affect directors' performance when it comes to monitoring and advising managers (Alam et al, 2014).…”

Section: Directors' Attributes and Their Monitoring Effectivenessmentioning

confidence: 99%

See 2 more Smart Citations

Does proximity to corporate headquarters enhance directors' monitoring effectiveness? A look at financial reporting quality

Firoozi

Magnan

Fortin

2018

Corporate Governance

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Research question/issue: In this study, using a unique Canadian setting that relies on a principle-based corporate oversight environment and that has access to a large pool of U.S. directors, we investigate how directors' proximity to a firm's headquarters influences its financial reporting quality.Research findings/insights: Our results show that financial reporting quality is higher for firms whose boards (audit committees) consist of a greater proportion of independent directors who reside close to a firm's headquarters than for firms whose boards consist of directors who are more geographically dispersed. However, among nonlocal directors, the effect of nonlocal domestic directors on financial reporting quality is similar to the effect of local directors. In contrast, compared with local directors, the presence of U.S. directors has a negative impact on financial reporting quality.Theoretical/academic implications: Our results suggest that directors' proximity to corporate headquarters extends beyond geographical proximity and also reflects directors' familiarity with a firm's institutional environment. Institutional familiarity helps domestic nonlocal directors reduce information costs associated with low geographical proximity, thus providing them with access to a wider range of information sources and enhancing their monitoring ability, at least for financial reporting. In contrast, foreign directors face information costs arising from both low geographical proximity and less familiarity with the institutional environment.Practitioner/policy implications: Firms should take into consideration the consequences of nominating nonlocal directors on the monitoring of financial reporting quality. In addition, regulators should take a more comprehensive approach if they impose regulations such as board diversity initiatives, as regulatory pressures often imply appointing directors farther away from headquarters.

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Section: Directors' Attributes and Their Monitoring Effectivenessmentioning

confidence: 99%

Section: Directors' Attributes and Their Monitoring Effectivenessmentioning

confidence: 99%

Section: Directors' Attributes and Their Monitoring Effectivenessmentioning

confidence: 99%

See 1 more Smart Citation

Does proximity to corporate headquarters enhance directors' monitoring effectiveness? A look at financial reporting quality

Firoozi

Magnan

Fortin

2018

Corporate Governance

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“…As geographical peer effects have been shown to influence corporate governance and actions (Kedia and Rajgopal, 2009;Knyazeva, Knyazeva, and Masulis, 2013;Alam et al, 2014;Parsons, Sulaeman, and Titman, 2014;Dougal, Parsons, and Titman, 2015), we augment the first-stage regression with the variable Power State. This variable, included only in the first-stage regressions, represents the proportion of powerful CEOs in the same state as the firm's headquarters (we exclude the firm under consideration when computing this proportion).…”

Section: Regressions Accounting For Self-selectionmentioning

confidence: 99%

CEO Power and Firm Performance under Pressure

Han¹,

Nanda²,

Silveri

2016

Financial Management

105

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Are powerful chief executive officers (CEOs) more effective in responding to pressure from the economic environment? Concentrating decision‐making power may facilitate rapid decision making; however, the quality of decision making may be compromised, with severe consequences for the firm if a powerful CEO is less likely to receive independent advice or to have her decisions scrutinized. We empirically investigate the performance of firms with powerful CEOs when industry conditions deteriorate. We focus on industry downturns as these represent an exogenous shock to a firm's environment and on settings in which CEO power and access to quality information is likely more consequential: innovative firms, firms with relatively little related‐industry board expertise, firms operating in competitive industries, and firms operating in industries characterized by relatively greater managerial discretion. In each of these settings we find powerful CEOs perform significantly worse than other CEOs, suggesting contexts in which centralized decision making is potentially of greater concern.

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“…First, our paper contributes to the burgeoning literature on the role of geographic proximity and firm location in corporate finance. This research has shown that geographic distance matters in various financial phenomena, such as bank lending (Petersen and Rajan, 2002;Berger et al, 2005), venture capital investment (Bengtsson and Ravid, 2009;Tian, 2011), capital structure and cash policy (Loughran, 2008;Almazan et al, 2010), payout policy (John et al, 2011), analyst coverage (Malloy, 2005;Bae et al, 2008), patenting (Jia and Tian, 2015), feedback along the supply chain (Chu et al, 2014), board information gathering (Alam et al, 2014), and board monitoring and advising services (Bennett, 2013). 4 In the context of M&As, Kedia et al (2008) find that acquirer returns in local transactions are more than twice as high as those in nonlocal transactions.…”

Section: Introductionmentioning

confidence: 99%