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

Zhe Li Orcid Logo, Oksana Pryshchepa, Bo Wang

Journal of Business Finance & Accounting, Volume: 50, Issue: 1-2

Swansea University Author: Zhe Li Orcid Logo

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DOI (Published version): 10.1111/jbfa.12575

Abstract

We examine the effect of 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...

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Published in: Journal of Business Finance & Accounting
ISSN: 0306-686X 1468-5957
Published: Wiley 2021
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URI: https://cronfa.swan.ac.uk/Record/cronfa58537
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first_indexed 2021-11-02T17:39:36Z
last_indexed 2023-01-11T14:39:12Z
id cronfa58537
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spelling v2 58537 2021-11-02 Financial experts on the top management team: Do they reduce investment inefficiency? c597db9f314a168667e3e40d5778db9c 0000-0003-1442-4499 Zhe Li Zhe Li true false 2021-11-02 CBAE We examine the effect of 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. Journal Article Journal of Business Finance & Accounting 50 1-2 Wiley 0306-686X 1468-5957 Investment Efficiency; Top Management Team; Demographic Characteristic; Financial Expert; Experience; Firm Performance 15 11 2021 2021-11-15 10.1111/jbfa.12575 COLLEGE NANME Management School COLLEGE CODE CBAE Swansea University 2024-07-17T15:49:26.6413842 2021-11-02T17:34:15.1584617 Faculty of Humanities and Social Sciences School of Management - Accounting and Finance Zhe Li 0000-0003-1442-4499 1 Oksana Pryshchepa 2 Bo Wang 3 58537__21642__485ec247b9a5451482ab7fd04c2afe68.pdf 58537.pdf 2021-11-23T15:14:30.2505787 Output 1808924 application/pdf Accepted Manuscript true 2023-11-15T00:00:00.0000000 true eng
title Financial experts on the top management team: Do they reduce investment inefficiency?
spellingShingle Financial experts on the top management team: Do they reduce investment inefficiency?
Zhe Li
title_short Financial experts on the top management team: Do they reduce investment inefficiency?
title_full Financial experts on the top management team: Do they reduce investment inefficiency?
title_fullStr Financial experts on the top management team: Do they reduce investment inefficiency?
title_full_unstemmed Financial experts on the top management team: Do they reduce investment inefficiency?
title_sort Financial experts on the top management team: Do they reduce investment inefficiency?
author_id_str_mv c597db9f314a168667e3e40d5778db9c
author_id_fullname_str_mv c597db9f314a168667e3e40d5778db9c_***_Zhe Li
author Zhe Li
author2 Zhe Li
Oksana Pryshchepa
Bo Wang
format Journal article
container_title Journal of Business Finance & Accounting
container_volume 50
container_issue 1-2
publishDate 2021
institution Swansea University
issn 0306-686X
1468-5957
doi_str_mv 10.1111/jbfa.12575
publisher Wiley
college_str Faculty of Humanities and Social Sciences
hierarchytype
hierarchy_top_id facultyofhumanitiesandsocialsciences
hierarchy_top_title Faculty of Humanities and Social Sciences
hierarchy_parent_id facultyofhumanitiesandsocialsciences
hierarchy_parent_title Faculty of Humanities and Social Sciences
department_str School of Management - Accounting and Finance{{{_:::_}}}Faculty of Humanities and Social Sciences{{{_:::_}}}School of Management - Accounting and Finance
document_store_str 1
active_str 0
description We examine the effect of 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.
published_date 2021-11-15T15:49:25Z
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score 11.036116

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