On the Dual Role of Foreign Directors : New Insights from the Russian Boards

Using a unique sample of hand-collected profiles of foreign directors over the period of 2006–2016, I examine whether foreign directors’ board representation improves its dual role of monitoring and advising executives. The setting for this study is Russian public companies’ boards of directors, which is different from that of prior research that was conducted in developed countries. I find that foreign directors’ board representation is positively associated with the probability of Russian companies’ cross-listing on London Stock Exchange’s Main Market, alone or in combination with other markets. Non-London stock exchanges that are popular among Russian companies are characterized by less rigorous listing and reporting obligations as compared to the London Stock Exchange. Accordingly, foreign directors enhance the boards’ advisory role but only in cases in which their expertise is critical. Notably, foreign directors’ serving on the audit committee is related to lower discretionary accruals and is associated with fewer modified audit opinion instances, thereby constraining managerial opportunistic behavior and enhancing the monitoring role of the board. Finally, I document that foreign directors’ board representation has an overall positive impact on the future firm value of Russian public companies