We investigate the relations among voluntary disclosure, earnings quality, and cost of capital. We find that firms with good earnings quality have more expansive voluntary disclosures (as proxied by a self‐constructed index of coded items found in 677 firms' annual reports and 10‐K filings in fiscal 2001) than firms with poor earnings quality. In unconditional tests, we find that more voluntary disclosure is associated with a lower cost of capital. However, consistent with the complementary association between disclosure and earnings quality, we find that the disclosure effect on cost of capital is substantially reduced or disappears completely (depending on the cost of capital proxy) once we condition on earnings quality. Extensions probing alternative proxies show that our findings are robust to measures of earnings quality and cost of capital, but not to other measures of voluntary disclosure. In particular, we find opposite relations for voluntary disclosure measures based on management forecasts and conference calls, and we find no relations for a press release based measure.

We examine how similarity in institutional, legal, and social characteristics between a firm's and its directors’ home countries, that is, country‐pair homophily, affects foreign director appointments. We estimate a gravity model that includes economic and geographic proximity and find that country‐pair homophily is a significant determinant of foreign director appointments to corporate boards. We also find that country‐pair homophily limits the appointments of foreign directors from high‐quality governance countries to firms located in low‐quality governance countries, which may reduce the role of board internationalization in promoting the global convergence of governance practices. We analyze changes in foreign director appointments around the international adoption of IFRS and Norway's gender‐quota rule and find a higher appointment likelihood for directors originating from countries that are institutionally and culturally similar to that of the firm. Our findings point to the critical role that country‐pair homophily plays in matching director to boards with implications for the diffusion of governance practices globally.