Foreign ownership and board cultural diversity

Abstract

This paper investigates the relationship between foreign ownership and board cultural diversity using detailed hand-collected data on firm ownership and board cultural diversity from Sweden. We have 13,655 observations at the director-firm-year level, with directors coming from 31 different countries. We find that board cultural diversity increases with the presence of foreign ownership. However, cultural diversity promoted by foreign owners does not translate into firm value creation. In addition, foreign owners do not promote other types of board diversity. Overall, these findings are consistent with homophily. Additional analyses show that the positive relationship between foreign ownership and board cultural diversity is more pronounced in firms with certain types of ownership structure (family firms, dual-class share firms, and concentrated ownership). We further show that foreign owners’ country of origin plays a role in board composition.