Existing studies suggest that stricter Corporate Governance Reform (CGR) reduces corporate risk-taking, primarily due to higher compliance costs and expanded liabilities of insiders or managers. We revisit the relationship between CGR and risk-taking in an emerging market setup characterized by weaker market forces of corporate scrutiny and greater insider ownership, which encourages firms to pursue investment conservatism. Using a quasi-natural experiment, we find that stricter CGR leads to greater corporate risk-taking. We further show that risktaking is an important channel through which CGR enhances firm value. Our findings support the view that stricter CGR can have a positive effect on corporate risk-taking and corporate investment decisions in an evolving regulatory environment.

We examine whether the effect of increased creditor rights on corporate borrowing depends on firms' access to internal capital. By exploiting a creditor protection reform in the Indian emerging market, empirical outcomes strongly indicate that strengthening of creditor rights leads to increased corporate borrowing among firms that have constrained access to internal capital compared to business group affiliated firms, which have relatively easier access to internal capital. Further, the increased corporate borrowing by firms with constrained access to internal capital, in the post-reform period, is associated with a greater expansion of real investments, improved operational performance, and better market valuation. Taken together, these findings indicate that expanding creditor rights may aid in improving allocative efficiency.

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We examine the effect of international regulations governing the market for corporate control (MCC) on firm risk-taking using the staggered enactment of country-level merger and acquisition (M&A) laws of 34 countries. Consistent with the theoretical argument of deterrence, we show that the MCC leads to unintended consequences by discouraging value-relevant corporate risk-taking. Our investigation of real earnings management suggests that the MCC induces real earnings smoothing and also provides evidence of shorttermism. This reduction in corporate risk-taking is associated with a decrease in real investments, an increase in cash-holding, an increase in debt employment, and a propensity to diversify in M&A. Further examination of the heterogeneous effect of the quality of national governance institutions on the relationship between the MCC and risk-taking shows that the country-level investor protection and transparency levels positively moderate the effect of the MCC. Our study highlights that there could be complementary roles played by national institutional features and the MCC in encouraging value-relevant corporate risk-taking. 1 Previous studies show that in many countries the corporate takeover market was largely unregulated or came under the jurisdiction of national stock exchanges before the takeover law enactment (Glendening et al., 2016).