Journal of Finance Vol. 63 No. 4 2008

Corporate Governance and Risk‐Taking

Kose John¹; Lubomir P. Litov²; Bernard Yeung^3,4,5

¹ New York University · ² Finance · ³ Washington University in St. Louis · ⁴ National University · ⁵ Yulin University

Abstract

Better investor protection could lead corporations to undertake riskier but value‐enhancing investments. For example, better investor protection mitigates the taking of private benefits leading to excess risk‐avoidance. Further, in better investor protection environments, stakeholders like creditors, labor groups, and the government are less effective in reducing corporate risk‐taking for their self‐interest. However, arguments can also be made for a negative relationship between investor protection and risk‐taking. Using a cross‐country panel and a U.S.‐only sample, we find that corporate risk‐taking and firm growth rates are positively related to the quality of investor protection.

DOI

10.1111/j.1540-6261.2008.01372.x

Volume

63

Issue

4

Pages

1679-1728

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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