Independent Directors and Risk Taking: Evidence from Listed US Insurance Companies

46 Pages Posted: 3 Apr 2013 Last revised: 28 Jun 2013

See all articles by Jyotirmoy Podder

Jyotirmoy Podder

Torrens University Australia

Michael T. Skully

Monash University - Department of Banking and Finance; Financial Research Network (FIRN)

Kym Brown

Monash Business School, Monash University; Financial Research Network (FIRN)

Multiple version iconThere are 2 versions of this paper

Date Written: April 1, 2013

Abstract

This study examines the relation of independent directors and their gender diversity, busyness, and experience with risk taking for 112 listed US insurance companies over 2003- 2010. Using OLS, system GMM and 3SLS, we find that board independence, females amongst independent directors and busy boards are positively related to risk taking. While board tenure is not related to risk taking, experienced boards are found to be positively related to risk taking. Our study contributes by extending the board structure literature to show that the composition of independent board members matters for monitoring. Female independent directors, rather than simply female directors, improve board monitoring but that more than two does not. A higher percentage of non-busy directors may also mitigate the adverse effect of busy directors. Furthermore, experience gained through serving on the board improves monitoring.

Keywords: Board independence, gender diversity, busy boards, experienced boards, risk taking, system GMM

JEL Classification: G22, G28, G32, G34, G38

Suggested Citation

Podder, Jyotirmoy and Skully, Michael T. and Brown, Kym, Independent Directors and Risk Taking: Evidence from Listed US Insurance Companies (April 1, 2013). Systemic Risk: Liquidity Risk, Governance and Financial Stability. Available at SSRN: https://ssrn.com/abstract=2242748 or http://dx.doi.org/10.2139/ssrn.2242748

Jyotirmoy Podder (Contact Author)

Torrens University Australia ( email )

220 Victoria Square
GPO Box 2025
Adelaide, South Australia 5000
Australia
+ 61 8 8113 7816 (Phone)

Michael T. Skully

Monash University - Department of Banking and Finance ( email )

900 Dandenong Road
Caulfield East, Victoria 3145
Australia
+61 3 9903 2407 (Phone)
+61 3 9903 1443 (Fax)

Financial Research Network (FIRN)

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

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

Kym Brown

Monash Business School, Monash University ( email )

P.O. Box 197
Caulfield East, Victoria 3800
Australia
61 3 9903 1053 (Phone)
61 3 9903 2422 (Fax)

Financial Research Network (FIRN)

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

HOME PAGE: www.firn.org.au

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