Directors’ Foreign Experience, Compensation and Company Performance: Evidence from China

Costs and benefits are both associated with directors’ foreign experience, complicating the relationship between foreign experience and firm performance. However, the existing literature has focused mainly on the impacts of such directors on reporting and financial indicators. Limited evidence has examined the relationship between directors’ foreign experience and firm performance, overlooking the role of directors’ compensation. Drawing on Resource Dependency Theory, this study examines whether directors’ foreign experience influences company performance and whether compensation serves as a mechanism through which organisational outcomes are enhanced. Analysing 26,026 observations of Chinese A-share listed companies between 2010 and 2022 using panel data regression analyses, results indicate that directors’ foreign experience is positively associated with company performance, with directors’ compensation acting as a partial mediator of this relationship. Overall, these results highlight the importance of appointing directors with foreign experience and the critical role of competitive compensation in attracting such talent to improve firm performance.