Do foreign chief executive officers perform better than local ones?

Abstract

This paper examines the relationship between the presence of the foreign chief executive officer (CEO) as a director of a firm and firm performance in Saudi Arabia. Performance is measured in terms of a business’ profitability proxy, return on assets (ROA), and the market performance measure, Tobin’s Q. Herein, we use a sample of non-financial companies that have been listed in Saudi Arabia between 2005 and 2016. The results reveal that firms managed by a local CEO outperform firms helmed by their foreign counterparts. They also support the notion that the success of managing directors in emerging markets requires cultural and inter-cultural skills.