Organisational non-compliance with principles-based governance provisions and corporate risk-taking

Ahmad, Sardar ORCID: 0000-0002-9745-808X, Akbar, Saeed, Halari, Anwar and Shah, Syed Zubair (2021) Organisational non-compliance with principles-based governance provisions and corporate risk-taking. International Review of Financial Analysis, 78. p. 101884.

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Abstract

This paper examines how risk-taking is affected by non-compliance with a ‘comply or explain’ based system of corporate governance. Using System Generalized Methods of Moments (GMM) estimates to control for various types of endogeneity, the results of this study show that non-compliance with the UK Corporate Governance Code is positively associated with total, systematic, and idiosyncratic risk. However, profitability moderates the impact of non-compliance on firms' risk-taking. The findings of this study further reveal that the impact of non-compliance with various provisions of the UK Corporate Governance Code is not uniform. That is, non-compliance with board independence provisions is associated with higher risk-taking. However, non-compliance with committees' chair independence is associated with lower risk-taking. These findings have implications for investors, policy makers, and corporations regarding the usefulness of compliance with a prescribed code of corporate governance.

Item Type:	Article
Uncontrolled Keywords:	Risk-taking, Non-compliance, Comply or explain, System GMM
Divisions:	Faculty of Humanities and Social Sciences > School of Management
Depositing User:	Symplectic Admin
Date Deposited:	08 Sep 2021 08:54
Last Modified:	18 Jan 2023 21:29
DOI:	10.1016/j.irfa.2021.101884
Related URLs:	Author Publisher
URI:	https://livrepository.liverpool.ac.uk/id/eprint/3136199