Abstract
ABSTRACT We study whether firms with central network boards influence investment efficiency. The results demonstrate that board centrality enhances investment efficiency and mitigates overinvestment but show an insignificant impact on underinvestment. This asymmetric effect on over and underinvestment can be attributed to different roles played by executive (internal) directors and external directors on the board. Further analysis reveals that the board centrality and investment efficiency relationship is stronger for firms with higher managerial entrenchment and informational asymmetry problems. The findings support the notion that social capital, in the shape of board networks, improves monitoring and information environment, consequently enhancing investment efficiency.
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