The Impact of Board Size on Firm-Level Capital Investment Efficiency

Amy E. Ji

International Journal of Economics and Finance, 2016, vol. 8, issue 10, 110-120

Abstract: The study aims to examine whether and how board structure is associated with firm-level capital investment efficiency. Specifically, I investigate whether the size of a firm¡¯s board is associated with the sensitivity of investments to the availability of internal funds. I hypothesize and find that board size is inversely related to investment-cash flow sensitivity. Larger boards seem to mitigate investment-cash flow sensitivity by reducing information asymmetry between managers and external capital providers. The study is important as it reveals that board structure influences the corporate investment policy, which is one of the most important firm economic decisions.

Keywords: board size; boards of directors; corporate governance; investment-cash flow sensitivity; corporate investment (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:ibn:ijefaa:v:8:y:2016:i:10:p:110-120

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