Influence of Director Expertise on Capital Structure and Cash Holdings in High-Tech Firms

摘要

Many "High-Tech" firms enjoy high market valuations despite negative earnings and low cash flows due in part to what many see as future bountiful earnings and cash flows, which is a cause for concern. How can corporate governance help? Do well-informed boards assist corporate success through better governance through their influence on financial policy: Capital Structure and Cash Holdings? We test these effects in "High-Tech firms" by segmenting firms into four levels based on technology intensity. We examine differences in board composition and the resultant influence on capital structure. Our fourteen-year sample period includes post-dotcom bubble years and post-Sarbanes-Oxley, which mandated the inclusion of financial experts on corporate boards. We defined two types of firm designated well-informed boards as a result of this analysis. We contribute to the literature in many ways. Using regression analysis and graph theory techniques, we found the educational makeup of high-tech firms to be significantly different from low-tech firms and that they approached capital structure with caution. Low-tech firms rely on board member network connectivity and agency theory's explicative powers.