Board effectiveness and firm investment efficiency

Business leaders and the Australian Stock Exchange (ASX) are calling for more effective boards, to ensure the goal of long-term survival and prosperity of firms. Efficient investment is the key to achieving firms' sustainability. Using 14-year panel data of all the companies listed on the ASX, this study investigates the association between a variety of board attributes and firm investment efficiency. The study provides evidence that boards with more concentrated functional expertise and higher director shareholdings are more effective in reducing both over-investment and under-investment. Smaller boards are able to reduce under-investment but not over-investment, while boards with longer average tenure restrain over-investment but not under-investment.