The purpose of this paper is to explore the relationship between board attributes and firm value to identify board attributes that are “pleasant” to have from what is required to have in financial and non-financial firms.
The paper uses five measures of firm value to estimate the relationship between internal governance mechanism for financial and non-financial firms using system generalized methods of moments.
The paper finds that board independence and board size is a “must” have and value-enhancing board attributes for financial firms. On the contrary, board independence may be considered as a “pleasant” board attribute for non-financial firms. Further, the paper finds that duality is not value-enhancing board attribute for both financial and non-financial firms.
The findings imply that differences in requirements for strategic or resource and monitoring functions in financial and non-financial firms are responsible for the differences in board attributes that are value-relevant for these firms.
The findings suggest that the value relevance of board attributes differs in financial and non-financial firms.
