Note(s): This table presents economic channels analyses through which the effect of OK on investment inefficiency are conveyed. The dependent variable, Investment inefficiency is the deviation from optimal investment and is computed as the residuals from the investment model. OKTA is the ratio of organizational capital to total assets and is our main independent variable. Panel A shows results for a corporate governance channel that relates to overall firm governance quality (Corporate governance), which is captured by a dummy variable equal to one if the “G” pillar score (based on the ESG data from the LSEG database) for a firm is above the sample median and zero otherwise, as well as several board attributes: Board size is a dummy variable that equals one if a firm has an above median board size and zero otherwise; Board independence is a dummy variable equal to one if a firm has above the median proportion of independent directors and zero otherwise. Board gender diversity is a dummy variable equal to one if a has above the median proportion of female directors on the board and zero otherwise. In Panel B, Information environment is a dummy variable equal to one if the quality of corporate disclosure is above the sample median and zero otherwise (disclosure quality is based on stock price synchrony as detailed in Section 6.3.2). CEO career concerns is constructed as a dummy variable equal to one if a firm’s headquarters is in a state adopting the Inevitable Disclosure Doctrine (IDD) and zero otherwise. R&D intensity is a dummy variable that equals one if a firm is a member of an intensive R&D industry and zero otherwise (intensive R&D industries are telecommunications, cable, electronics, pharmaceuticals, chips, computer/peripherals, software, wireless/internet, satellite, tech retail, tech blue chips, and networking, which are identified based on 3-digit SIC codes). Control variables in both panels include size, ROA, slack, tangibility, firm age, leverage, Tobin’s Q, and Loss. All remaining variables are as defined in  Appendix 1. Figures in parentheses are standard errors that are clustered at the firm level for heteroscedasticity. (^***) (^**) (^*) significance at the (1%) (5%) (10%) levels

Source(s): Authors’ own work