The influence of business groups on board composition in offshore financial multinational enterprises
The influence of business groups on board composition in offshore financial multinational enterprises
Based on resource dependence theory we argue for an influence of business groups (BGs) on the board composition of constituent offshore financial multinational enterprises (FMNEs). Using a unique sample of 171 Caribbean FMNEs in an inter-island BG setting, we find BGs’ control in constituent firms to be indicative of the importance of the internal financing and intermediation within the group network. This control leads to a higher proportion of lawyers hired to the boards of directors in BG-constituent firms and supports the argument that lawyers provide skills in complex offshore regulatory frameworks that facilitate BGs’ optimal tax management. Furthermore, we observe that an increased adoption of shareholder rights governance by BG-constituent firms is associated with increased engagement with outside resource providers, increased potential conflicts of interest and hence a need for hiring more lawyers. Our interpretation is that offshore FMNEs have a need for more lawyers, whose legal skill is critical to the competitive advantage of FMNEs.
Business Groups, Caribbean, Institutions, Offshore, Offshore financial MNE, Tax Havens
Hearn, Bruce
45dccea3-9631-4e5e-914c-385896674dc2
Oxelheim, Lars
2779fed2-36f3-4c53-8419-629fffd61ffc
Randøy, Trond
5c347a43-8b02-4477-ad5c-18adc1098926
1 June 2023
Hearn, Bruce
45dccea3-9631-4e5e-914c-385896674dc2
Oxelheim, Lars
2779fed2-36f3-4c53-8419-629fffd61ffc
Randøy, Trond
5c347a43-8b02-4477-ad5c-18adc1098926
Hearn, Bruce, Oxelheim, Lars and Randøy, Trond
(2023)
The influence of business groups on board composition in offshore financial multinational enterprises.
International Business Review, 32 (3), [102084].
(doi:10.1016/j.ibusrev.2022.102084).
Abstract
Based on resource dependence theory we argue for an influence of business groups (BGs) on the board composition of constituent offshore financial multinational enterprises (FMNEs). Using a unique sample of 171 Caribbean FMNEs in an inter-island BG setting, we find BGs’ control in constituent firms to be indicative of the importance of the internal financing and intermediation within the group network. This control leads to a higher proportion of lawyers hired to the boards of directors in BG-constituent firms and supports the argument that lawyers provide skills in complex offshore regulatory frameworks that facilitate BGs’ optimal tax management. Furthermore, we observe that an increased adoption of shareholder rights governance by BG-constituent firms is associated with increased engagement with outside resource providers, increased potential conflicts of interest and hence a need for hiring more lawyers. Our interpretation is that offshore FMNEs have a need for more lawyers, whose legal skill is critical to the competitive advantage of FMNEs.
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Accepted/In Press date: 26 November 2022
e-pub ahead of print date: 30 November 2022
Published date: 1 June 2023
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© 2022 The Authors
Keywords:
Business Groups, Caribbean, Institutions, Offshore, Offshore financial MNE, Tax Havens
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Local EPrints ID: 476546
URI: http://eprints.soton.ac.uk/id/eprint/476546
ISSN: 0969-5931
PURE UUID: 318d3b14-3219-47ba-b859-227e9b3d641b
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Date deposited: 05 May 2023 16:39
Last modified: 17 Mar 2024 03:52
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Author:
Lars Oxelheim
Author:
Trond Randøy
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