The Role of Corporate Board Diversity in Mitigating Supply Chain Disruptions : The Impact of Foreign Nationals

We explore the role of foreign directors in mitigating the effects of supply chain disruptions caused by economic policy uncertainty (EPU) spikes in their home countries. Using a large sample of global supply chain relationships of US manufacturing firms, we show that the likelihood of a US buyer having a foreign director from a given supplier country increases with that country’s EPU. Furthermore, EPU spikes in a supplier country are associated with significantly lower sales and firm value for the supplier’s US buyers; however, these effects are mitigated when the buyer has a foreign national from that country on its board of directors. Our cross-sectional tests suggest that the impact of foreign nationals in mitigating the effects of supply chain disruptions is more pronounced for firms that are smaller in size, highly leveraged, and financially distressed and have lower cash holdings. Taken together, our results highlight the benefits of foreign national members of corporate boards, particularly for firms with significant dependence on foreign suppliers