International diversification and firm performance: the moderating effects of corporate governance

In spite of plentiful research on the international diversification-performance relationship, the link between the arrangement of governance systems and the performance of internationally diversified firms is under-explored. Drawing on complementary theoretical perspectives, this study examines the moderating effect of corporate governance on the relationship between international diversification and firm performance. The results show that firms experience superior performance in international diversification when they pay higher levels of managerial compensation, have a larger proportion of independent board members, and separate the roles of CEO and board chairman. This study contributes by showing that firms might alleviate challenges in managing international transactions, and thus improve the performance outcome of their foreign operations, through implementing better arrangements of corporate governance.