Board Structure And Corporate Risk-taking

Corporate risk-taking behavior is an important behavior in the company’s management activities, which not only reflects the attitude of companies engaged in the operation and management activities, but also has an important impact on the corporate potential value. In the normal production and business activities of the corporation, taking the necessary professional risk reasonably, plays an important role to the corporate continued innovation and development. However, due to different risk attitudes of managers and shareholders of the corporate creates agency problems, thus restrains the level of corporate risk-taking. Board structure play an important role in corporate governance, however, we don’t get a clear conclusion about that whether board structure can play an active role in restricting company managers’risk avoidance behavior and promoting companies to improve corporate risk-taking levels? This paper testes the relationship between board structure and corporate risk-taking. In this paper,716listed companies range from2002to2011are used as sample. In the framework of dynamic endogeneity, we use the dynamic System GMM model, through internal instrumental variables to solve the problem of finding instrumental variables, taking into account the three kinds of endogeneity at the same time, based on a dynamic perspective to study the relationship between board structure and corporate risk-taking. And this paper gets the following results:(a) Both in the prior and the current, board size are negatively correlated with current corporate risk-taking;(b) Both in the prior and the current, CEO duality are negatively correlated with current corporate risk-taking;(c) Current board independence has a significant positive correlation to corporate risk-taking, however, pre-board independence has a significant negative relationship to corporate risk-taking;(d) There is an intertemporal interaction between board structure and corporate risk-taking. Not only pre-board structure has a significant impact on the current corporate risk-taking, but also pre-corporate risk-taking has a significant feedback effect on the current board structure;(e) The empirical results proved that there is dynamic endogeneity between board structure and corporate risk-taking;(f) A higher corporate risk-taking can lead to a higher corporate value both in the current and next period;(g) A higher corporate risk-taking can lead to a higher corporate investment efficiency both in the short term and long term. Based on the conclusions of this paper, listed companies should adjust board structure mainly from board size and CEO duality in order to improve the level of corporate risk-taking, and further more to enhance corporate value.