Board Financial Expertise and Firm’s Investment Opportunity: Evidence From Pakistan

Abstract

Board financial expertise has become a key topic of study due to its viability in finance business. During recent years a lot of research work has been conducted to focus on having financial expertise on board and their decisions regarding investment. This research was mainly focused on the proposed hypothetical model to explore the relationship between the board financial expertise and firm’s investment opportunity of non-financial sector in Pakistan. Sample population consists of 177 non-financial firms/companies of Pakistan for the period of 2010-2015 and data collection was done through Bloomberg database and annual reports of the companies. This research was carried out to study the relationship of board financial expertise with firm’s investment opportunity of non-financial listed firms in Pakistan. Main objective of this study was to be aware of the board financial expertise and their impact on the firm investment opportunity of the non-financial firms of Pakistan. One independent variable, six control variables and one dependent variable has been used to measure the impact of board financial expertise on firm’s investment opportunity. The one independent variable is proportion of financial experts on board (FIN), and six control variables are firm size (LNTA), leverage, plant property equipment (PPE), return on assets (ROA) and percentage of institutional investor holding (INST), while the firm investment opportunity has been measured on the basis of one measure capital expenditure (CAPEXP) which is dependent variable. This study evaluates descriptive statistical analysis, correlation and regression analysis to evaluate the effect of board financial expertise factors on the firm investment opportunity of the firms. It was found that board financial expertise have significant impact on firm investment opportunity. This research has been aimed to provide repercussions for firms by throwing light on the potential means of focusing firm investment opportunity. This research will provide practical grounds for other firms to adopt the ways in order to improve firm investment opportunity. The importance and implementation of board financial expertise in order to improve firm investment opportunity.