Board Reforms And Corporate Investment Efficiency:Worldwide Evidence.

Board reform is an intentional interference in corporate governance by state or security exchange of a country to enhance firm value.From the corporate governance perspective,one way to increase firm value is to increase inflows which is evidence in investment efficiency.This research examines the effect of board reforms on corporate investment efficiency in 41 countries from 1990 to 2012.I employ the difference-in-differences(DID)design and find a positive and significant relationship between board reforms and corporate investment efficiency.Further,I find that the impact of the board reforms on corporate investment efficiency is more pronounced in common law countries as compared with civil law countries.In other analyses,I find that the positive relationship between board reform and corporate investment efficiency is similar across rule-based and comply-or-explain approaches.Finally,I find that the positive impact of the board reform on investment efficiency is attributed to the board independence and audit committee and auditor independence components but not the separation of CEO/chairperson’s position.This study contributes to the existing literature by documenting that board reform can be used to curb agency problem which leads to investment efficiency,thus reducing overinvestment and underinvestment.These findings have significant implications for policy makers and investors on how effective and strong corporate governance can influence management decisions about investment.To confirm results,I perform several robustness checks;alternative measure of investment efficiency,pseudo test and,alternate samples.