In addition to board size, board independence should also have an impact on firm value. Inside directors
provide firm- and project-specific knowledge that assists the board in understanding the detailed aspects of the
firm’s business. In contrast, outside (or independent) directors contribute expertise and objectivity that ostensibly mitigates managerial entrenchment and expropriation of firm resources. The governance literature
generally suggests that as boards become increasingly independent of managers, their monitoring effectiveness
increases, thereby decreasing managerial opportunism and enhancing firm performance.