The Moderating Role of Non-executive Director Board Presence on the Relation between Investment Opportunity and Financial Performance

Document Type : Research Paper

Authors

1 Assistant Professor of Management, University of Guilan,

2 Associate Professor of Management of Guilan University

3 Master of Business Administration, University of Guilan

Abstract

Control is the main task of managerial board, according to agency theory. Presence of non-executive director boards in firms' executive boards is very important in better internal organizing, improvement of decision making processes and consequently firms' performance.
The purpose of this study is to investigate the moderating role of non-executive director board presence on the relationship between investment opportunities and financial performance of the firms in Tehran Stock Exchange (TSE). In this research, data of 85 firms of Tehran Stock Exchange during years of 2010 - 2016 are gathered through panel data. The results show that board independence has a moderating role on the relationship between investment opportunities and financial performance of these firms. Results in the last part of paper, reveal that non-executive director board monitoring reduces information asymmetry and agency costs that leads to stronger effect of investment opportunities on financial performance of the firms in our study.

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Journal of Accounting and Social Interests
Volume 7, Issue 2 - Serial Number 25
September 2017
Pages 88-103

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History

  • Receive Date: 27 June 2016
  • Revise Date: 11 June 2017
  • Accept Date: 03 January 2017

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