The effect of business strategy on firm value: the moderating role of board of directors' structure

Abstract

This study examines the effects of cost leadership and differentiation strategies on firm value and tests whether board size and board independence moderate these relationships. The analysis uses 582 firm-year observations from 67 non-financial firms listed on the Amman Stock Exchange from 2014 to 2023. Panel regressions are applied, with the generalized method of moments (GMM) used for robustness. Both cost leadership and differentiation are positively associated with firm value. However, board size and board independence do not significantly moderate these relationships, indicating that these positive effects of strategy on firm value do not vary systematically with board size or board independence. The findings suggest that managers should align their strategic choices with firm capabilities and market conditions, while boards and regulators should focus more on directors' expertise, engagement, and strategic oversight than on board size and independence alone. This study provides new evidence on the strategy–firm value relationship in Jordan, an emerging market characterized by concentrated ownership and evolving governance practices. It also contributes by showing that board size and board independence do not significantly moderate the value effects of competitive strategies.