Board Characteristics and the Valuation Effects of Corporate Joint Venture Investments

This study investigates the valuation effect of board characteristics in corporate Joint Venture (JV) investments. Despite the prevalence of a board's involvement in JV decisions in practice, extant literature is mute concerning how the board adds value to JV outcomes. Investigation into board contribution in JVs is insightful due to executives' self-serving behaviors that may underlie their JV pursuits and boards' resource provision that may mitigate critical JV challenges. The former (latter) sheds light on the board's monitoring (advisory) role in a firm's JV engagement. Drawing on agency theory and resource dependence theory, this study investigates the value of representative board characteristics underscored by these two theoretical perspectives. Our results show that the two conventional board measures, board size and outside director ratio, do not have a significant explanatory power. In contrast, director experience associated with JV decisions and gained from within relevant industries are found to positively impact JV outcomes. Moreover, both board meeting frequency and director ownership have favorable moderating effects on the strength of the experience-value relationship. However, these two variables per se do not independently determine a JV's value. Our research results indicate the importance of taking an integrative view to the investigation of board effectiveness, a perspective which has long been neglected in board research. The findings of the present study contribute to the mixed findings of extant studies on board influence from an uninvestigated domain, JV.