The Board Governance And Corporate Risk Taking Of Chinese A-sharing Companies

As the most important decision-making and regulatory organ, the Board of Directors isconsidered the core of a company’s internal management system. The improvement of thegovernance of the Board can help enhancing the company’s risk-bearing capacity and the valuemaximizing. This paper focuses on the relationship between the corporate board governance andthe risk-taking behaviorby analyzing all the companies listed in Shanghai Stock Exchange andShenzhen Stock Exchange along the year1998to2009, using OLS regression models as well asFixed Effect Model. Conclusions are drawn as follows:(1) The size of the corporate board and the corporate risk taking is negatively related; butthe proportion of independent directors within the board and the ownership of the board are bothpositively related to the corporate risk taking; there were no significant relation between theboard’s leadership structure and corporate risk taking.(2) Taking into account the special institutional background of Chinese transition economyperiod, this paper analyzes the effect of China’s unique equity constraints, more specific, thecompany’s ultimate controller and the event of China’s split-share reform, and get a series ofnew discoveries:We found that the negative relation between state-controlled companies’ board size andcorporate risk taking turns out to be much more significant than it is in private-holdingcompanies. While on the other hand, the positive relation between the proportion of independentdirectors or the ownership of the board and the corporate risk taking among private-holdingcompanies would be much significant than among state-holding ones.This study is a useful complement to the domestic existing literature architecture, itprovides an important reference and comparison basis for related research and plays a certainrole in guiding government’s policy on board governance, corporate risk control as well as theownership structure adjustment.