http://ijfr.sciedupress.com International Journal of Financial Research Vol. 7, No. 5; 2016 Published by Sciedu Press 146 ISSN 1923-4023 E-ISSN 1923-4031 Intensive Board Monitoring and Firm Value: An Empirical Analysis in the Context of Saudi Arabia Hanan Alhussayen 1 & Ridha Shabou 1 1 College of Business Administration, King Saud University, Riyadh, Saudi Arabia Correspondence: Hanan Alhussayen, College of Business Administration, King Saud University, Riyadh, Saudi Arabia. Tel: 966-5-0532-4162. Received: September 29, 2016 Accepted: October 11, 2016 Online Published: October 15, 2016 doi:10.5430/ijfr.v7n5p146 URL: http://dx.doi.org/10.5430/ijfr.v7n5p146 Abstract This paper intends to examine the role of intensive monitoring by the boards of Saudi listed firms in protecting the firm's resources through analyzing its impact on firm value. Intensive Board Monitoring (IBM) is measured through the independence of the oversight board committees, which is the audit and the nomination and remuneration committees. Whereas the firm's valuation variables that we apply in this paper are Tobin's Q and M-B ratio. The sample understudy covers all the firms listed in the Saudi stock market, except the firms listed in the banking and insurance sectors, over the period 2008 till 2013. The results of the analysis, when we apply the Ordinary Least Square (OLS) approach, reveal that Intensive Board Monitoring (IBM) has a positive and significant impact on firm value. This positive impact is strengthened when we apply the Two Stage Least Square (2SLS) approach, which prove the endogenous nature of the IBM variables. Keywords: Intensive Board Monitoring (IBM), firm value The managers of the firm can misuse its resources rather than working for the firm's best interest, which causes the principle-agent agency problem (Jensen & Meckling, 1976; Fama & Jensen, 1983). Similarly, the principle-principle agency problem results from the pursuance of the controlling shareholders for their own interests rather than considering the interests of the minority shareholders (Claessens, Djankov, & Lang, 2000). Both of these two agency problems require an effective control mechanism, such as the board of directors, to prevent the managers of the firm and its controlling shareholders from misusing the firm's resources. The effectiveness of the board results from its role, as an internal governance mechanism, in monitoring the actions taken by the managers and controlling shareholders of the firm. The outside board members are considered more effective monitors than the inside board members, as a result, of their independence from the firm (Raheja, 2005). The intensive monitoring by the outside members of the board is proved by previous research to has an impact on the value of the firm (Faleye, Hoitash, & Hoitash, 2011; Byun, Lee, & Park, 2013). Therefore, we intend to define in this paper whether the Intensive Board Monitoring (IBM) by the boards of Saudi listed firms enhances the valuation of these firms. Also we plan to identify whether an endogeneity problem occur in this relationship, where the firm valuation can influence the degree of monitoring intensity by the board. Such analysis is important to measure the effectiveness of the outside members of the boards of Saudi listed firms in monitoring the actions taken by the managers of the firm and its controllers to protect the firm's resources. Most of the papers that analyze the impact of board independence on the performance of the firm apply the composition ratio of outside directors of the board. This measure of board independence can't identify precisely whether the monitoring role, advisory role, or both roles of the board has an impact on firm's performance (Adams & Ferreira, 2007; Faleye et al., 2011; Byun et al., 2013). Therefore, we intend in this paper to apply Intensive Board Monitoring (IBM) as a measure of board independence because it can define whether the monitoring role of the board is more effective than its advisory role in improving the value of the firm. The sample understudy covers a panel data of all the firms listed in the Saudi stock market, except the firms listed in the banking and insurance sectors, over the period 2008 till 2013. We begin the analysis in this paper by defining the impact of Intensive Board Monitoring (IBM) on firm value, measured by Tobin's Q and M-B ratio, through applying the Ordinary Least Square approach (OLS). After that, we