Board size and firm risk-taking

被引：111
作者：
Chia-Jane Wang
机构：
[1] Manhattan College, School of Business, Riverdale, NY 10471
来源：
Review of Quantitative Finance and Accounting | 2012年 / 38卷 / 4期
关键词：
Boards of directors; Investment policy; Managerial incentives; Risk-taking;
D O I：
10.1007/s11156-011-0241-4
中图分类号：
学科分类号：
摘要：
The main purpose of this paper is to investigate the relevance of board size and firm's risky policy choices. I find that both the managerial pay to performance sensitivity (delta) and the managerial pay to firm risk sensitivity (vega) are negatively related to board size, suggesting that small boards give CEOs larger incentives and force them to bear more risk than larger boards. While controlling for the effects of managerial compensation schemes on corporate investment policy and financing policy, I find that companies with smaller boards take lower leverage but more risky investment. Finally, after controlling for the effects of financial decisions on overall firm risk, I find that companies with smaller boards are associated with higher future risk. This supports the hypothesis that board size has negative impact on firm's risk taking. My results are robust to various estimation methods that control for endogeneity and panel dynamics. © 2011 Springer Science+Business Media, LLC.
引用
收藏
页码：519 / 542
页数：23
相关论文
共 55 条
[1]  
Almeida H., Campello M., Weisbach M., The cash flow sensitivity of cash, J Finance, 59, pp. 1777-1804, (2004)
[2]  
Anderson R., Mansi S., Reeb D., Board characteristics, accounting report integrity and the cost of debt, J Acc Econ, 37, pp. 315-342, (2004)
[3]  
Arellano M., Bond S., Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations, Rev Econ Stud, 58, pp. 277-297, (1991)
[4]  
Arellano M., Bover O., Another look at the instrumental variable estimation of error-components models, J Econom, 68, pp. 29-51, (1995)
[5]  
Ashbaugh-Skaife H., Collins D., Lafond R., The effects of corporate governance on credit rating, J Acc Econ, 42, pp. 203-243, (2006)
[6]  
Bartels L., Instrumental and quasi-instrumental variables, Am J Polit Sci, 35, pp. 777-800, (1991)
[7]  
Berger P., Ofek E., Yermack D., Managerial entrenchment and capital structure decisions, J Finance, 52, pp. 1411-1438, (1997)
[8]  
Bhagat S., Welch I., Corporate research and development investments international comparisons, J Acc Econ, 19, pp. 443-470, (1995)
[9]  
Blundell R., Bond S., Initial conditions and moment restrictions in dynamic panel data models, J Econ, 87, pp. 115-143, (1998)
[10]  
Boone A., Field L., Karpoff J., Raheja C., The determinants of corporate board size and composition: An empirical analysis, J Finance Econ, 85, pp. 66-101, (2007)
123456