This study examines the influence of foreign equity and board membership on corporate
strategy and the management of internal costs of banks headquartered in Portugal using
proprietary data maintained by the Central Bank. The findings reveal that foreign equity
reduces both total and operating costs, and foreign board membership reduces domestic
banks’ dependence on revenues from traditional areas of business and enhances the
potential for generating revenues from non-traditional areas of business. These results are
controlled for a variety of standard accounting ratios used in the literature. We argue that
foreign equity and board membership forces banks to redirect corporate strategy and to
reduce internal costs.