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Is Board Industry Experience a Corporate Governance Mechanism?

  • Drobetz, Wolfgang

    ()

  • von Meyerinck, Felix

    ()

  • Oesch, David

    ()

  • Schmid, Markus

    ()

Registered author(s):

    We analyze the valuation effect of board industry experience and channels through which industry experience of outside directors affects firm value. Firms with more experienced outside directors are valued at a premium compared to firms with less experienced outside directors. Additional tests indicate that our results stem from within-firm variation and that board industry experience causes higher firm values. Firms with experienced boards exhibit lower investment-cash flow sensitivities, build up valuable financial slack by holding cash, shape operating policies, and provide better incentivized compensation packages to CEOs. Our results suggest that board industry experience is a valuable corporate governance mechanism.

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    File URL: http://www1.vwa.unisg.ch/RePEc/usg/sfwpfi/WPF-1401.pdf
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    Paper provided by University of St. Gallen, School of Finance in its series Working Papers on Finance with number 1401.

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    Length: 73 pages
    Date of creation: Jan 2014
    Date of revision:
    Handle: RePEc:usg:sfwpfi:2014:01
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    Web page: http://www.unisg.ch/de/Schools/Finance.aspx

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