Do Independent Directors’ Scientific Achievements Matter? Evidence from Over-Investment of Chinese Listed Firms

Based on manually-collected data of Chinese listed firms from 2005 to 2017, we document that scientists who serve as independent directors (SIDs) effectively restrain firm over-investment. This conclusion remains robust after a PSM-DID test, a placebo test, and further control of twoway fixed effects. A policy shock in 2009 had a salient effect of promoting the adoption of SIDs among Chinese listed firms and strengthened their monitoring function. The effect of SIDs is stronger when firms have higher agency costs between management and shareholders, which indicates an agency problem alleviation channel of SIDs.