Financial experts on the top management team: Do they reduce investment inefficiency?

Journal article

Li, Z., Pryshchepa, O. and Wang, B. 2021. Financial experts on the top management team: Do they reduce investment inefficiency? Journal of Business Finance & Accounting. 50 (1-2), pp. 198-235. https://doi.org/10.1111/jbfa.12575
AuthorsLi, Z., Pryshchepa, O. and Wang, B.
Abstract

We examine the effect of the top management team (TMT) professional finance experience on firm investment efficiency. Top managers with a career background in finance help reduce deviations of investment from the level warranted by firm fundamentals. Reductions in investment inefficiencies are achieved by financial expert managers using project-specific rather than company-wide, discount rates for project evaluation and facilitating debt and equity issuance at lower costs. Greater investment efficiency due to the financial expertise of TMT improves firm performance. We demonstrate that these improvements are driven by the collective expertise of the TMT rather than solely by chief executive officers.

KeywordsFinance; Business; Accounting; Management
Year2021
JournalJournal of Business Finance & Accounting
Journal citation50 (1-2), pp. 198-235
PublisherWiley
ISSN0306-686X
1468-5957
Digital Object Identifier (DOI)https://doi.org/10.1111/jbfa.12575
Official URLhttps://onlinelibrary.wiley.com/doi/10.1111/jbfa.12575
Publication dates
Online15 Nov 2021
Publication process dates
Accepted19 Oct 2021
Deposited16 Jan 2025
Output statusPublished
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