|Publication||Board industry experience, firm value, and investment behavior|
University of Hamburg, University of St. Gallen
Corporate Finance, Corporate Governance
Board of directors, director skills, director experience
We analyze the valuation effect of board industry experience and channels through which industry ex-perience of outside directors affects firm value. We find that firms with more experienced outside di-rectors are valued at a premium compared to firms with less experienced outside directors. Our results are attributable to within-firm variation and indicate that board industry experience causes higher firm values. Firms with experienced boards are able to limit investment distortions (lower investment-cash flow sensitivities) by building up valuable financial slack. Overall, board industry experience seems to be a valuable corporate governance mechanism.