In this paper, we construct the three-factor model introduced by Chen et al. (2010) for a European sample covering 10 countries from the European Monetary Union and the period from 1990 to 2006. Two key findings result. First, we show that the properties of the European factors are comparable to those of the US factors. Second, we show that the alternative three-factor model’s explanatory power is either equal or superior to the explanatory power of traditional models when applied to five commonly known stock market anomalies. Our results thus suggest the use of international versions of the Chen et al. (2010) factor model in addition to traditional factor models in international empirical finance research.

We analyze the valuation effect of board industry experience and channels through which industry experience of outside directors relates to 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. The association between having directors with more industry experience and higher firm value is more pronounced for firms with larger investment programs, larger cash reserves, and during crises. In contrast, it is weaker in more dynamic industries, i.e., industries that rank high in terms of sales growth, R&D expenditures, merger activities, competitive threat, and product market changes, where the value of previously acquired experience is likely to be diminished. Overall, our findings are consistent with board industry experience being a valuable corporate governance mechanism.