Lead independent director, managerial risk-taking, and cost of debt: Evidence from UK

Andrews Owusu, Frank Kwabi, Ruth Owusu-Mensah and Ahmed A Elamer

Journal of International Accounting, Auditing and Taxation, 2023, vol. 53, issue C

Abstract: We extend the existing literature on how the adoption of a lead independent director is related to corporate outcomes by documenting that the presence of a lead independent director on the board is significantly and negatively related to managerial risk-taking. The result is more pronounced for firms with a non-independent board chair. In a further analysis, we document that decreased managerial risk-taking leads to a reduction in the cost of debt for firms with a lead independent director on the board. Overall, our results suggest that the adoption of a lead independent director is an effective governance mechanism when the board chair is not independent, which supports the motivation of the United Kingdom corporate governance code.

Keywords: Lead independent director; Managerial risk-taking; Cost of debt (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jiaata:v:53:y:2023:i:c:s1061951823000551

DOI: 10.1016/j.intaccaudtax.2023.100576

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