Does Monitoring by Independent Directors Reduce Firm Risk?

Ni, Yang; Purda, Lynnette D.

doi:10.2139/ssrn.1986289

Cited by 12 publications

(20 citation statements)

References 43 publications

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“…In contrast to our finding, most prior studies document either a negative (e.g., Bargeron et al, 2010;Ni and Purda, 2012), or an insignificant relation between independence and risk-taking (e.g., Cheng, 2008). However, with the exception of Bargeron et al (2010), most studies rely on crosssectional variations, which are susceptible to the endogeneity concern.…”

Section: Introductioncontrasting

confidence: 99%

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Does Board Independence Reduce the Cost of Debt?

Bradley

Dong

2014

SSRN Journal

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Using the passage of the Sarbanes-Oxley Act and the associated change in listing standards as a natural experiment, we find that while board independence decreases the cost of debt when credit conditions are strong or leverage low, it increases the cost of debt when credit conditions are poor or leverage high. We also document that independent directors set corporate policies that increase firm risk. These results suggest that, acting in the interest of shareholders, independent directors are increasingly costly to bondholders with the intensification of the agency conflict between these two stakeholders.

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Section: Introductioncontrasting

confidence: 99%

“…For example, Ni and Purda (2012) use CEO tenure as an IV for board independence. But Chen and Zheng (2013) argue and find evidence that CEO tenure matters for risk-taking behavior.…”

Section: Introductionmentioning

confidence: 99%

Does Board Independence Reduce the Cost of Debt?

Bradley

Dong

2014

SSRN Journal

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“…[19], examines this relation to find a positive relation between independent directors and risk taking. While another study conducted by [34], record those firms with a higher percentage of independent directors have a lower idiosyncratic risk.…”

Section: Non-executive Directors and Bank Risk-takingmentioning

confidence: 99%

The Relationship Between Board of Directors’ Characteristics and Bank Risk-Taking: Evidence from Egyptian Banking Sector

Abobakr¹

2017

JFA

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Abstract:There is argument that the main reason behind the corporate failure is the engagement of banks in excessive risk taking. However, the existence literature provides conflicting evidence in this concern. The main objectives of this study is to investigate the influence of board characteristics on bank risk taking, by using Pooled Ordinary Least Squares regression techniques to test a sample of 27 Egyptian banks covering the period from 2006 to 2011. Measures of bank risk employed are the insolvency risk, credit risk and liquidity risk. The explanatory variables of board characteristics are board size, nonexecutive directors, CEO duality, female presence and, board qualifications. The control variables are bank size, debt ratio, and crisis. The results show that Board size is positively significant with the three measures of risks. Non-executive directors are negatively significant correlated with both insolvency and liquidity risk. CEO's duality is found positively significant with credit risk. Board female is negatively significant with insolvency and liquidity risk, while it is positively significant with credit risk. Board qualifications have no effect on the three measures of risks. The findings support the idea that board of director's characteristics is a determinant factor for bank risk taking.

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“…Smaller boards are also considered to be more effective in attaining higher monitoring (Jensen, 1993;Lipton and Lorsch, 1992;Yermack, 1996). However, recent papers suggest that the board size effect depends very much on the form of the organization (Coles et al, 2008;Ni and Purda, 2012). To capture the effectiveness of the board based on its size we include the measure, namely BRD_SIZE, defined as the number of members sitting on the board.…”

Section: Corporate Governance Attributesmentioning

confidence: 99%

Corporate Governance and Firm‐specific Stock Price Crashes

Andreou

Antoniou

Horton

et al. 2016

Euro Fin Management

275

150

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We investigate whether ownership structure, accounting opacity, board structure & processes and managerial incentives attributes relate to future stock price crash risk. Principal component analysis on the 21 attributes that comprise these four corporate governance dimensions reveals that they can explain between 13.1% and 23.0% of a one standard deviation in crash risk. Transient institutional ownership, CEO stock option incentives and the proportion of directors that hold equity increase crash risk, whilst insiders' ownership, accounting conservatism, board size and the presence of a corporate governance policy mitigate crash risk. Overall these relationships are more pronounced in environments that accentuate agency risk.

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Does Monitoring by Independent Directors Reduce Firm Risk?

Cited by 12 publications

References 43 publications

Does Board Independence Reduce the Cost of Debt?

Does Board Independence Reduce the Cost of Debt?

The Relationship Between Board of Directors’ Characteristics and Bank Risk-Taking: Evidence from Egyptian Banking Sector

Corporate Governance and Firm‐specific Stock Price Crashes

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