Corporate Board and Firm Risk: An Emerging Market Perspective

Abstract

This study examines the relationship between board features and firm risk of listed companies in Colombo Stock Exchange for the period of 2010 to 2017. This research was carried out based on positivistic paradigm with the quantitative methodology. Secondary data were collected and analyzed using panel data analyze techniques to obtain quantitative measures of descriptive statistics, correlations, and regression analyses. The results show that the board features variables such as Board size, Women on board, Non-executive director, CEO Duality and Director Interlock have significant impact on firm risk. The results are consistent with agency theory perspective. On the other hand, Audit committee does not show any impact on firm risk in Sri Lankan companies. Our findings reveal that consistence is with theoretical expectation and code best practices. Further, it suggests that as far as the risk is concerned the existing corporate governance practices and code of best practices are effective in Sri Lankan context.

Gender Diversity Effect on Tax Avoidance and Firm Risk

“…The results of this study are in line with research conducted by [64]; [4]; [65]; [74]; [62] Gender diversity has a negative effect on firm risk. This study is not in line with research [51] which states that gender diversity has a significant positive effect on firm risk and research [28]; [75] which shows there is no effect of gender diversity to firm risk.…”

“…Previous research [62] stated that gender diversity had a significant positive effect on firm risk, research [4][4] showed the effect of gender diversity had a negative effect on firm risk and research results [3] stated the existence of female members have no effect on firm value. [63] describes the relationship between board diversity and firm value in the context of agency theory and based on board relationships as a means of control and monitor for the company.…”

“…There is a difference in risk preference between male and female CEOs of companies in Vietnam where there is a characteristic coefficient value of 58% of the gender gap in the risk index [9]. Research [64]; [65]; [62] states that gender diversity has a significant negative effect on firm risk. Research [51] shows the effect of gender diversity has a positive effect on firm risk and research results, [28] gender diversity does not affect firm risk as well, meanwhile [3] states that the presence of female members has no effect on company value.…”