This study, focusing on the recent quasi-exogenous increase in the number of outside (independent) directors among listed firms, presents empirical evidence on the impact of outside (independent) directors on investments and firm performance. Using a panel of Japanese firms, we make comparisons between listed and unlisted firms and instrumental variable estimations to examine causal relationships. According to the findings, rapid increase in the number of outside directors among listed firms does not promote positive investments and risk-taking behavior. In addition, it does not have significant impact on profitability or productivity of the firms. However, since the time horizon of the analysis is limited to up to two years after the change in the board structure, long-term impacts are beyond the scope of this study.