The Impact of Board Governance on Firm Risk among China’s A-Share Market-Listed Companies from 2010 to 2019

Na Xu, Wendong Lv () and Junli Wang
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Na Xu: Business School, University of International Business and Economics, Beijing 100029, China
Wendong Lv: Business School, University of International Business and Economics, Beijing 100029, China
Junli Wang: Business School, University of International Business and Economics, Beijing 100029, China

Sustainability, 2023, vol. 15, issue 5, 1-20

Abstract: This paper selects firm downside risk and firm upside risk as proxy variables of enterprise risk, and the proportion of independent directors as a proxy variable of board governance. Using the panel data of Chinese listed companies from 2010 to 2019, a multiple linear regression model is established to empirically study the impact of supervisory function and advisory function of board governance on the downside risk and the upside risk, to test whether the two functions of the board of directors play a role in the enterprise risk management (ERM). The internal mechanism and boundary conditions of board governance that affect firm risk are also explored in this paper. It is found that the sample enterprises pay more attention to the board‘s supervisory function. At the same time, they reduce the firm’s overall risk by reducing the downside risk and the upside risk while performing this function. We also identify that boards are more likely to use meetings to communicate and strategize to prevent upside risks than to identify and control downside risks. Finally, boards are negatively affected by CEO duality in performing their oversight functions.

Keywords: board governance; independent director; downside risk; upside risk (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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