Abstract
This paper investigates the impact of board gender diversity on a firm’s investment inefficiency. We document that firms with gender-diverse boards have significantly less investment inefficiency than firms without gender-diverse board and the fraction of female directors on the board is sigificantly negative correlated with investment inefficiency. The instrumental variable approach indicates that the negative relation is robust after addressing endogeneity concerns. Subsample analysis indicates that the effect of board gender diversity on investment inefficiency is focused on firms with CEO- chairman duality and firms with longer CEO tenures. We also document that board independence is a channel for board gender diversity to reduce investment inefficiency.
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