Information Content Of Outside Directors From Different Backgrounds And Over Investment

Over investment is an inefficient investment behavior caused by information asymmetry and agency problems.The purpose of the outside director system introduced in 1993 is to alleviate the principal-agent problem caused by the separation of ownership and management.However,there are endogenous problems in the outside directors,especially the large shareholders' meeting,which has a significant impact on the outside directors,so the outside director system is often regarded as a mere formality by the theoretical and practical circles.But in fact,"mere formality" often points to the "supervisory function" of most outside directors.In addition,outside directors also have consulting function,resource support function,reputation function and other multiple functions.This paper explores the "information transfer function" of outside directors.Outside directors with different backgrounds have different quality conditions,knowledge framework and social resources.Based on the theory of resource dependence,the company prefers to hire outside directors with the resources(contacts,reputation,professional ability,etc)needed by the company.In this regard,this paper starts with the background characteristics of outside directors,and studies the relationship between the information content of outside directors hired by Chinese listed companies with overseas,legal and academic backgrounds and over investment.After that,"equity nature" is introduced as a regulating variable for further study.This paper selects all A-share listed companies in Shenzhen and Shanghai from 2008 to 2018 as research samples,excluding ST,* ST and PT companies,financial and insurance companies,companies with incomplete or extremely abnormal data.After the empirical study,we draw the following conclusions:(1)under the condition that other conditions remain unchanged,the more the company employs outside directors with overseas background,the more likely the company is to over invest;(2)under the condition that other conditions remain unchanged,the more the company employs outside directors with academic background,the more likely it is to curb the over investment;(3)the nature of equity is independent of legal background There is a positive regulatory effect between directors and over investment.In state-owned enterprises,the more outside directors with legal background are employed,the more can restrain the over investment of enterprises.From the perspective of information transmission,this paper explores the relationship between outside directors of different backgrounds and over investment,and measures the effectiveness of outside directors from a new perspective.This means that investors can judge whether the company will over invest by observing the behavior of employing outside directors with different backgrounds and other relevant information,so as to make investment decisions.