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This paper investigates the effect of major board independence reforms on corporate investment efficiency using a large sample of firms from 30 countries. We find evidence of a significant reduction in over-investment subsequent to initiation of board reforms. This reduction is most effective (1) in countries with rule-based reforms and higher liability standards and (2) in firms with lower insider ownership and higher analyst coverage. We also find stronger reductions in over-investment among firms most affected by board reforms – firms that did not have majority board independence at the time of reform. Furthermore, we provide evidence that firms have lower deviations from the level of expected investments following board reforms. Our evidence is consistent with major country-level board reforms that increase the percentage of independent directors enhancing investment efficiency through the mitigation of the moral hazard problem for over-investing firms.

Significance Flowering plants reproduce via a unique double-fertilization event, producing the zygote and the nutritive endosperm. The genome of the central cell, the precursor of the endosperm, undergoes extensive demethylation prior to fertilization. This epigenetic reconfiguration, directed by the DEMETER (DME) glycosylase at thousands of loci in Arabidopsis, differentiates the epigenetic landscapes of parental genomes and establishes parent of origin-specific expression of many imprinted genes in endosperm essential for seed development. However, how DME is targeted to various locations remains unknown. Here we show that the multidomain DME is organized into 2 functional regions: the C-terminal region, which guides localization and catalysis, and the N-terminal region, which likely recruits chromatin remodelers to facilitate demethylation within heterochromatin., The Arabidopsis DEMETER (DME) DNA glycosylase demethylates the maternal genome in the central cell prior to fertilization and is essential for seed viability. DME preferentially targets small transposons that flank coding genes, influencing their expression and initiating plant gene imprinting. DME also targets intergenic and heterochromatic regions, but how it is recruited to these differing chromatin landscapes is unknown. The C-terminal half of DME consists of 3 conserved regions required for catalysis in vitro. We show that this catalytic core guides active demethylation at endogenous targets, rescuing dme developmental and genomic hypermethylation phenotypes. However, without the N terminus, heterochromatin demethylation is significantly impeded, and abundant CG-methylated genic sequences are ectopically demethylated. Comparative analysis revealed that the conserved DME N-terminal domains are present only in flowering plants, whereas the domain architecture of DME-like proteins in nonvascular plants mainly resembles the catalytic core, suggesting that it might represent the ancestral form of the 5mC DNA glycosylase found in plant lineages. We propose a bipartite model for DME protein action and suggest that the DME N terminus was acquired late during land plant evolution to improve specificity and facilitate demethylation at heterochromatin targets.