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Board financial expertise and corporate financial policies Open Access

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This study investigates whether financial experts on the board affect firm economic decisions. Motivated by agency theory, I examine the relationship between board financial expertise and corporate financial policies. I do not find significant results for leverage, cash, and investment policies. However, I find that board financial expertise influences a firm's dividend policy. Furthermore, I find that the level of agency costs proxied by the percentage of institutional ownership mitigates the relationship between board financial expertise and dividend policies. Employing propensity score matching and instrument variable approaches to control for possible endogeneity produce the similar results. The results are important as they demonstrate board financial expertise has effects beyond financial reporting quality by affecting crucial corporate policies.

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