Do Differences Make a Difference? Board Chair–CEO Nationality Diversity and R&D Investment

Event details

This CFCI event will explore the impact of Chair–CEO nationality diversity on R&D investment.

Abstract

This study seeks an answer as to whether that nationality diversity between board chair (Chair) and CEO affects R&D intensity. The motivation of the study stems from (i) the importance placed on the role of R&D spending as an input of innovation, thereby enhancing a firm’s sustainability, (ii) the significant increase of nationality diversity in corporate boards, and (iii) the pivotal role of the Chair in leading the board, overseeing and advising the CEO.

Using a sample of firms listed in the UK FTSE350 index between 2010 and 2018, we find that Chair–CEO nationality diversity positively affects R&D intensity. Our findings are essentially explained by agency theory (i.e. Chair–CEO nationality diversity can foster the Chair's cognitive independence, leading to intensive monitoring in the form of more scrutinizing of the CEO’s decisions) and resource dependency theory (i.e. strategic decisions benefit from wider networks, additional perspectives and broader mindsets of the Chair and the CEO when they differ in nationality).

Our finding holds when we limit the sample to R&D-intensive industries, and after controlling for potential sample selection bias. Beyond its contribution to the literature, the finding has important implications for practice, especially for companies that are eager to strengthen corporate governance and maintain sustained innovation).

Biography

Dr. Alaa Alhaj Ismail is an Assistant Professor of Accounting at the Centre for Financial and Corporate Integrity of Coventry University. His representative research has been published in internationally excellent academic journals (The British Accounting Review, Accounting and Business Research, Review of Quantitative Finance and Accounting, Journal of International Accounting, Auditing and Taxation, Journal of Contemporary Accounting and Economics and the Australian Accounting Review).

Alaa's academic research addresses accounting issues with important policy relevance, and his research interest focuses on financial reporting and disclosure, accounting regulations and capital market accounting research. He also engages further with interdisciplinary research in corporate governance, auditing, & CSR.

He has examined a wide array of topical issues ranging from the economic consequences of accounting standards and disclosure regulations to the capital market and information impact of corporate governance reform, financial crisis, and executives' & employees' engagement, efficiency and compensations.

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