Corporate governance and firm risk-taking: empirical evidence from India

Reshma Kumari Tiwari and Ratish Kumar Jha

International Journal of Law and Management, 2024, vol. 67, issue 3, 372-391

Abstract: PurposeThis study aims to examine the impact of corporate governance (CG) on firm risk-taking in India.Design/methodology/approachThe present study is based on a panel data set of 100 non-financial Indian firms randomly selected from the top 500 firms listed on the Bombay Stock Exchange. The study uses two market-based measures to capture firm risk-taking – total risk and idiosyncratic risk. Generalised method of moments model is applied to examine the relationship between CG and firm risk-taking. Additionally, the fixed-effects model is applied to check the robustness of the results.FindingsThe study reveals a significant negative impact of CG index, CEO duality, multiple directorships, promoter ownership and institutional ownership on firm risk-taking. Whereas board size, board independence, board gender diversity and the number of board meetings do not significantly impact firm risk-taking.Originality/valueThis study contributes to the existing literature by providing a comprehensive view of how various CG attributes shape firm risk-taking in India. It examines eight CG variables: board size, board independence, board gender diversity, CEO duality, multiple directorships, number of board meetings, promoter ownership and institutional ownership. Furthermore, the study incorporates idiosyncratic risk as an additional measure of firm risk-taking, largely overlooked in the Indian context. Moreover, to the best of the authors’ knowledge, this is the first study to examine the impact of CG index on firm risk-taking in India.

Keywords: Corporate governance; Firm risk-taking; Board gender diversity; CEO duality; Promoter ownership; Institutional ownership; Idiosyncratic risk (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijlmap:ijlma-01-2024-0028

DOI: 10.1108/IJLMA-01-2024-0028

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