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

Author

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

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.

Suggested Citation

  • Owusu, Andrews & Kwabi, Frank & Owusu-Mensah, Ruth & Elamer, Ahmed A, 2023. "Lead independent director, managerial risk-taking, and cost of debt: Evidence from UK," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 53(C).
    • Handle: RePEc:eee:jiaata:v:53:y:2023:i:c:s1061951823000551
    DOI: 10.1016/j.intaccaudtax.2023.100576
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