Board Industry Experience, Firm Value, and Investment Behavior

Item Type Monograph (Working Paper)
Abstract

We analyze the valuation effect of board industry experience and channels through which industry experience of outside directors affects firm value. Our analysis shows that firms with more experienced outside directors are valued at a premium compared to firms with less experienced outside directors. Additional analyses, including a quasi-experimental setting based on director deaths, mitigate endogeneity concerns. Firms with experienced boards limit investment distortions (lower investment-cash flow sensitivities) by building up valuable financial slack. The results further indicate that firms with experienced boards undertake shareholder-value friendly investments, particularly into R&D. Overall, our findings are consistent with board industry experience being a valuable corporate governance mechanism.

Authors Drobetz, Wolfgang; Oesch, David; Schmid, Markus & von Meyerinck, Felix
Language English
Keywords Board of directors; Director skills and experience; Cash Holdings; Corporate governance
Subjects business studies
HSG Classification contribution to scientific community
Refereed No
Date 2014
Publisher School of Finance
Place of Publication St. Gallen
Series Name School of Finance Working Paper Series
Number 2014/1
Depositing User Prof. Dr. Markus Schmid
Date Deposited 14 Feb 2014 09:51
Last Modified 10 May 2018 00:21
URI: https://www.alexandria.unisg.ch/publications/229377

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Citation

Drobetz, Wolfgang; Oesch, David; Schmid, Markus & von Meyerinck, Felix: Board Industry Experience, Firm Value, and Investment Behavior. School of Finance Working Paper Series, 2014, 2014/1.

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https://www.alexandria.unisg.ch/id/eprint/229377
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