By Dave DeFusco
A new study published in the Journal of Corporate Finance has found that firms with foreign owners tend to have more culturally diverse boards but that cultural diversity, unlike gender diversity, does not seem to have value implications for firms.
The research, “,” was co-authored by S. Abraham Ravid, Sy Syms Professor of Finance at Â鶹´«Ă˝Ół», and colleagues in the Netherlands and Belgium. Using hand-collected data from 220 publicly listed Swedish companies leading to more than 13,000 director-firm-year observations, the team examined how ownership structures interact with corporate governance and what that means for diversity at the top.
“We wanted to understand whether foreign owners actually change the composition of boards, and if so, how,” said Professor Ravid. “Sweden offers a unique testing ground because its ownership records are transparent, and large owners play a central role in nominating board members. That allowed us to trace how ownership translates into influence.”
While debates over board diversity often focus on gender and race, this study took a different approach. The authors measured cultural diversity—the range of national backgrounds represented on corporate boards—using Hofstede’s cultural dimensions, a framework that captures values such as individualism, power distance and uncertainty avoidance.
“Cultural diversity hasn’t received the same level of policy attention as gender or ethnic diversity,” said Professor Ravid. “It’s harder to observe and quantify, but it may be just as important for how boards function, especially in globalized markets.”
While regulators have mandated gender quotas in many countries—Norway famously requiring 40% female representation on boards, and the U.S. Securities and Exchange Commission approving Nasdaq’s push for gender and ethnic reporting—cultural diversity has largely been left to companies’ discretion.
The research team’s findings were clear: companies with foreign owners have more culturally diverse boards. This relationship persisted even after controlling for firms that do business internationally or that have foreign directors who double as investors.
“It’s not just that a foreign investor joins the board and makes it more diverse by default,” said Professor Ravid. “Even when we exclude those cases, the relationship remains strong. It’s a genuine governance effect.”
The mechanism, the authors argue, lies in Sweden’s distinctive corporate governance structure. Unlike in many countries, Swedish shareholders, particularly large ones, have seats on nomination committees, which propose who will serve on boards. When those shareholders are foreign, their preferences for diversity appear to carry through.
“When foreign owners sit on nomination committees, board diversity increases significantly,” said Professor Ravid. “They use their influence to broaden the search for qualified directors beyond local circles.”
The study found that the link between foreign ownership and cultural diversity is strongest in firms where owners have more control, such as family businesses, dual-class share structures or companies with concentrated ownership.
“These are settings where large shareholders have real sway over decisions,” said Professor Ravid. “If that shareholder happens to be foreign, their global networks and broader perspectives make a difference.”
Foreign investors, the study suggests, may also bring governance advantages beyond diversity. Past research shows that they are often more objective monitors of management because they lack the local social and business ties that can bias domestic owners. They may also bring more resources and better managerial know-how, helping professionalize oversight.
Despite the clear link between foreign ownership and cultural diversity, the researchers did not find evidence that such diversity boosts firm value. Nor does it correlate with other forms of board diversity, such as independence or gender balance. That counterintuitive result led the authors to an intriguing interpretation—quasi-homophily.
“Homophily is the tendency for people to associate with others like themselves,” said Professor Ravid. “We see something slightly different here. Foreign owners may prefer to add directors who are culturally closer to them, even if they’re not Swedish, because it makes interactions smoother. So the board becomes more diverse overall, but that diversity might reflect comfort rather than a deliberate pursuit of innovation or performance.”
The team also found variation among foreign owners themselves. Scandinavian investors, from neighboring Denmark, Norway or Finland, tended to promote diversity in cultural values. Non-Scandinavian owners, by contrast, simply increased the presence of foreign directors, not necessarily those with distinct cultural viewpoints.
The study contributes to multiple lines of research on ownership structure, governance and board diversity, and raises new questions about what kind of diversity matters most for effective leadership.
“This is the first study, to our knowledge, to demonstrate a direct, measurable connection between foreign ownership and board cultural diversity,” said Professor Ravid. “It shows that ownership structure is not just a financial variable. It shapes who gets a seat at the table and by extension, how corporate decisions are made.”
