Do friendly boards impact the value of real options?

This study examines the association between friendly boards and the value of real options. Using a panel dataset that consists of 321,168 firm-month observations of 5322 firms from 2000 to 2018, our empirical results show that friendly boards are positively associated with the value of real options. The results are robust to other measures of friendly boards, different model specifications, alternative explanations, and different endogeneity concerns. The effect of friendly boards on the value of real options is stronger in firms with low managerial ability, low growth opportunities, high advisory needs, and strong corporate governance. Also, friendly boards positively affect the value of real options at a decreasing rate as the level of friendly boards increases.