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Board Structure and Exchange Rate Risk in Emerging Market Firms

Author

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  • Ekta Sikarwar

    (Indian Institute of Management Kozhikode)

Abstract

The role of strong corporate governance mechanisms in encouraging value-enhancing risk management activities is well documented by literature. However, the research is scant on investigating the effects of corporate governance on firms’ exchange rate risk. Drawing on the agency theory, this study argues that a firm’s board structure as a firm-level governance mechanism should significantly affect the level of exchange rate risk. Using a sample of 373 firms from 10 emerging markets from Jan 2011-March 2018, this study examines the effects of board attributes such as board size, board composition, board leadership, and board gender diversity on firms’ exposure. The findings reveal that the board size, the proportion of independent directors on board, and the presence of women on board are associated with lower exchange rate risk. Additionally, the effect of the presence of women directors on firms’ exposure becomes stronger when there’s higher board independence.

Suggested Citation

  • Ekta Sikarwar, 2021. "Board Structure and Exchange Rate Risk in Emerging Market Firms," Working papers 407, Indian Institute of Management Kozhikode.
    • Handle: RePEc:iik:wpaper:407
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    Keywords

    Exchange rate risk; Board of directors; emerging market; Women on board; Firmlevel internal corporate governance;
    All these keywords.

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