What is it about?
We assess suboptimal level of investment by measuring how much firms deviate from the expected level of capital expenditures, R&D expenses, and acquisition spending within their industry. We find that task-oriented diversity attributes, such as tenure and expertise, are negatively associated with suboptimal investment, suggesting that diverse boards in terms of firm specific experience and functional expertise are more effective in overseeing corporate investment activities than homogeneous boards.
Featured Image
Why is it important?
Our results provide insights on the recent regulatory requirements on board diversity and recommend greater task-oriented diversity in corporate boardrooms to achieve optimal level of firms' investment.
Perspectives
This study emphasizes the importance of board diversity on board's role to oversee (monitor) firms' risk taking and investments. The study specifically highlights and contrasts the impact of task-oriented versus demographic diversity on firms' deviation from optimal investments. The study indicates that task-oriented diversity (e.g., tenure and expertise) on the board is needed to alleviate suboptimal investments and therefore calls for higher diversity in such dimension.
Dr Maretno Agus Harjoto
Graziadio Business School - Pepperdine University
Read the Original
This page is a summary of: Board diversity and corporate investment oversight, Journal of Business Research, September 2018, Elsevier,
DOI: 10.1016/j.jbusres.2018.04.033.
You can read the full text:
Contributors
The following have contributed to this page
