Board Diversity and Corporate Investment Monitoring

59 Pages Posted: 18 May 2018

See all articles by Maretno A. Harjoto

Maretno A. Harjoto

Pepperdine University - Pepperdine Graziadio Business School (PGBS)

Indrarini Laksmana

Kent State University - Department of Accounting

Ya-Wen Yang

Wake Forest University - Schools of Business

Date Written: January 24, 2018

Abstract

This study examines the association between board diversity, measured in both relation-oriented dimension (i.e., gender, race, and age) and task-oriented dimension (i.e., tenure and expertise), and board performance in corporate investment monitoring. We assess sub-optimal investment by measuring how much firms deviate from the expected level of capital expenditures, R&D expenses, and acquisition spending within their industry. Using a sample of 15,125 firm-year across 1,898 firms from 1998 to 2014, we find that task-oriented diversity attributes, such as tenure and expertise, are negatively associated with sub-optimal 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. Our results shed light on the recent regulatory requirements on board diversity and recommend greater task-oriented diversity in corporate boardrooms.

Keywords: Board Diversity, Board Effectiveness, Board Composition, Corporate Investment Monitoring

JEL Classification: M14, G30, G34, G38

Suggested Citation

Harjoto, Maretno Agus and Laksmana, Indrarini and Yang, Ya-Wen, Board Diversity and Corporate Investment Monitoring (January 24, 2018). Available at SSRN: https://ssrn.com/abstract=3174065 or http://dx.doi.org/10.2139/ssrn.3174065

Maretno Agus Harjoto

Pepperdine University - Pepperdine Graziadio Business School (PGBS) ( email )

Drescher Campus Suite 344
24255 Pacific Coast Highway
Malibu, CA 90263
United States
(310) 506-8542 (Phone)
(310) 506-4126 (Fax)

HOME PAGE: http://scholar.google.com/citations?hl=en&user=9-PfQi0AAAAJ

Indrarini Laksmana (Contact Author)

Kent State University - Department of Accounting ( email )

P.O. Box 5190
Kent, OH 44242-0001
United States

Ya-Wen Yang

Wake Forest University - Schools of Business ( email )

P.O. Box 7659
Winston-Salem, NC 27109-7285
United States
336-758-2934 (Phone)

Register to save articles to
your library

Register

Paper statistics

Downloads
84
Abstract Views
829
rank
294,767
PlumX Metrics