Intense Board Monitoring and Risky Corporate Investment—Evidence from the Financial Crisis Period

• In Event: Public Interest

Abstract

This study investigates the role of board monitoring intensity on firms’ capital investment decisions during the recent financial crisis period. It uses the investment over industry median value as a proxy for overinvestment and uses the standard deviation of stock returns as a backup for robustness check. Overall, the findings suggest that there is a negative association between the intense board monitoring and firms’ risky investment in general. During the financial crisis, the board monitoring intensity plays an affirmative role in firms’ capital investment decision. It assists firms further decreasing the investment in risky spending. The findings shed light on the implications of board monitoring’s effectiveness over management control.

Author

• Jing Wang, Kent State University