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Board size and corporate risk-taking: Further evidence from Japan

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  • Nakano, Makoto
  • Nguyen, Pascal

Abstract

Evidence based on US firms suggests that large boards restrain risk taking. We investigate whether a similar effect exists in Japan. Our results confirm that firms with larger boards exhibit lower performance variability relative to firms with smaller boards. However, this effect is less significant when firms have plenty of investment opportunities, but considerably stronger when firms have few growth options. This new finding is consistent with recent evidence indicating that larger boards are not necessarily detrimental to firm performance. The results are shown to be robust to the endogeneity of board structure and the use of alternative risk measures and estimation methods.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 38990.

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Date of creation: 24 May 2012
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Handle: RePEc:pra:mprapa:38990

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Keywords: corporate governance; board size; risk taking; investment opportunities; performance volatility; bankruptcy risk;

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Cited by:
  1. Aman, Hiroyuki & Nguyen, Pascal, 2013. "Does good governance matter to debtholders? Evidence from the credit ratings of Japanese firms," Research in International Business and Finance, Elsevier, Elsevier, vol. 29(C), pages 14-34.
  2. Juan Ma & Tarun Khanna, 2013. "Independent Directors’ Dissent on Boards: Evidence from Listed Companies in China," Harvard Business School Working Papers, Harvard Business School 13-089, Harvard Business School, revised Oct 2013.
  3. Kogilavani Apadore & Siti Subaryani Binti Zainol, 2014. "Determinants of Corporate Governance and Corporate Performance among Consumer Product Industry in Malaysia: A Theoretical Model," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 4(2), pages 159-165, April.
  4. Pascal Nguyen & Nahid Rahman, 2014. "Which Governance Characteristics Affect the Incidence of Divestitures in Australia?," Working Paper Series, Finance Discipline Group, UTS Business School, University of Technology, Sydney 180, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
  5. Boubaker, Sabri & Nguyen, Pascal & Rouatbi, Wael, 2012. "Large shareholders and firm risk-taking behavior," MPRA Paper 39005, University Library of Munich, Germany.

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