Is the grass greener on the other side? The role of Western directors strategy in Asian firms

Drawing on Upper Echelon Theory (UET), this study examines how Western directors in Asian-listed firms influence firm performance in Asian markets. The study employs the system GMM to estimate a dynamic model capturing the relationship between the Western board and firm performance. Based on a cross-country sample of 14,320 firms’ years of observations from 2010 to 2019, the empirical evidence suggests that firms with Western boards (comprising a majority of Western directors, ≥50%) exhibit a positive and statistically significant impact on firm performance. Further, the presence of a Western CEO (1/0) is positively and significantly related to firm performance. These findings show that Western directors play a significant role enhancing firm performance when they hold a majority position on the corporate board or occupy the CEO role. The study also finds that their role is not restricted by the firm’s complexity, internationalization, and ownership structure (except state ownership). In an additional analysis, the study finds Western boards and Western CEOs complement each other in their positive association with firm performance. Theoretically, the study adds to the Upper Echelon Theory (UET) by exploring the role of Western directors in an Asian context.