The effect of multiple directorships on investment efficiency

Abstract

In this article, I investigate the effect of multiple directorships on investment efficiency. Through the study of Korean firms, this article confirms that the existence and proportion of multiple directorships were negatively related to investment efficiency. The study also found that multiple directorships were strongly related to underinvestment. Accordingly, it concludes that multiple directorships are an obstacle to directors’ fulfillment as it impedes effective investment opportunities and prevents them from playing leading roles in managerial decision-making. This, in turn, affects investment efficiency negatively.