Problem Directors and Corporate Risk-Taking

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dc.citation.volumeEarly View
dc.contributor.authorBhuiyan MBU
dc.contributor.authorLiu J
dc.contributor.authorAlam A
dc.contributor.editorJohan S
dc.date.accessioned2024-06-10T02:48:20Z
dc.date.available2024-06-10T02:48:20Z
dc.date.issued2023-10-20
dc.description.abstractThis study investigates the impact of a ‘problem director’ on the risk-taking propensity of a firm and its consequences for firm value. Analysing a sample of US companies, we find that corporate risk-taking propensity increases when a firm appoints a problem director. Our results are of economic significance, indicating that a one standard deviation increase in problem director's score leads to a 2.33% to 4.17% increase in corporate risk-taking. Mediation analysis reveals that a problem director increases firm risk-taking through reducing financial reporting quality. Further, a firm's risk-taking increases when a new problem director joins the board, and the damaging effect persists even after the problem director has left. Moreover, if a chief executive officer (CEO) is a problem director, s/he displays a greater predisposition for risk-taking. Moreover, when a problem director also sits on a board led by a problem CEO, we determine that the former will have an even greater propensity to take risks. Further analysis determines that the presence of problem directors damages long-term firm value in the aftermath of risk-taking behaviour. Overall, this study provides fresh evidence revealing a web of connections between a problem director, ineffective corporate governance and a decline in firm value.
dc.description.confidentialfalse
dc.format.pagination1-31
dc.identifier.citationBhuiyan MBU, Liu J, Alam A. (2023). Problem Directors and Corporate Risk-Taking. British Journal of Management. Early View. (pp. 1-31).
dc.identifier.doi10.1111/1467-8551.12770
dc.identifier.eissn1467-8551
dc.identifier.elements-typejournal-article
dc.identifier.issn1045-3172
dc.identifier.urihttps://mro.massey.ac.nz/handle/10179/69761
dc.languageEnglish
dc.publisherJohn Wiley and Sons Ltd on behalf of British Academy of Management
dc.publisher.urihttps://onlinelibrary.wiley.com/doi/10.1111/1467-8551.12770
dc.relation.isPartOfBritish Journal of Management
dc.rights(c) 2023 The Author/s
dc.rightsCC BY-NC 4.0
dc.rights.urihttps://creativecommons.org/licenses/by-nc/4.0/
dc.titleProblem Directors and Corporate Risk-Taking
dc.typeJournal article
pubs.elements-id483997
pubs.organisational-groupOther
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