Corporate Governance and Risk-Taking: Evidence from Japanese Firms

33 Pages Posted: 11 Feb 2010

See all articles by Pascal Nguyen

Pascal Nguyen

Neoma Business School; University of Technology Sydney (UTS); Financial Research Network (FIRN)

Date Written: January 5, 2010

Abstract

This paper evaluates the influence of corporate governance on the risk taking of Japanese firms. We find that family control and ownership concentration are associated with higher idiosyncratic risk, whereas bank control has the opposite consequence. Considering the link between idiosyncratic risk and firm performance, the results provide a rationale for the higher (lower) performance of family-controlled firms (bank-controlled firms). The results also explain the higher performance of firms with concentrated ownership by relating their governance structures to the risk-taking strategies that are associated with greater competitive advantages. Finally, we show that the impact of governance structures on risk taking is stronger after controlling for endogeneity.

Keywords: corporate governance, family firms, bank control, idiosyncratic risk, firm performance

JEL Classification: G30

Suggested Citation

Nguyen, Pascal, Corporate Governance and Risk-Taking: Evidence from Japanese Firms (January 5, 2010). Available at SSRN: https://ssrn.com/abstract=1550709 or http://dx.doi.org/10.2139/ssrn.1550709

Pascal Nguyen (Contact Author)

Neoma Business School ( email )

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University of Technology Sydney (UTS) ( email )

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HOME PAGE: http://datasearch.uts.edu.au/business/finance/staff/StaffDetails.cfm?UnitStaffId=4415

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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