We find the confluence of CEO-same industry experience makes independent directors particularly helpful in enhancing value-added growth and we identify a channel: guidance toward higher value-added R&D investments and higher quality innovations. Further corroborating these inferences, we find greater improvement in value-added growth when (1) independent directors with industry–CEO experience (IDICEs) have experience in more similar industries; (2) they create more shareholder value as CEO; and (3) they are current CEOs. In addition, IDICEs contribute to value-added growth most when firm environments and characteristics are conducive for active board-management interaction; namely, when product markets are more competitive and dynamic, when outsiders can more easily acquire firm-specific information, and when firms are younger and smaller. Consistent with our inferences on how IDICEs contribute to value-added growth, firms growing faster, less successfully innovating, and/or under strong governance tend to be matched with IDICEs.

We hypothesize that labor participation in governance helps improve risk sharing between employees and employers. It provides an ex post mechanism to enforce implicit insurance contracts protecting employees against adverse shocks. Results based on German establishment-level data show that skilled employees of firms with 50% labor representation on boards are protected against layoffs during adverse industry shocks. They pay an insurance premium of 3.3% in the form of lower wages. Unskilled blue-collar workers are unprotected against shocks. Our evidence suggests that workers capture all the gains from improved risk sharing, whereas shareholders are no better or worse off than without codetermination.

We investigate whether acquiring more primary education has long-term effects on risk-taking behavior in financial markets. Using exogenous variation in education from a compulsory schooling change combined with wealth data for the Swedish population, we estimate the effect of education on stock market participation and on the share of financial wealth invested in stocks, conditional on participation. For men, an extra year of education increases market participation by two percentage points and the share of financial wealth allocated to stocks by 10%. We find suggestive evidence that greater financial wealth is a potential channel through which education increases participation, consistent with the existence of fixed costs. Lower risk aversion is a potential channel through which education increases the stock share. The reform has less effect on female schooling attainment and there is no evidence that this additional education affects women’s asset allocation. There is no evidence of spillovers to children.