Publication:
The effect of co-opted directors on firm risk during a stressful time: Evidence from the financial crisis

Issued Date

2020-01-01

Resource Type

Article

ISSN

15446123

DOI

10.1016/j.frl.2020.101538

Other identifier(s)

2-s2.0-85084742244

Rights

Mahidol University

Rights Holder(s)

SCOPUS

Bibliographic Citation

Finance Research Letters. (2020)

Suggested Citation

Sirithida Chaivisuttangkun, Pornsit Jiraporn The effect of co-opted directors on firm risk during a stressful time: Evidence from the financial crisis. Finance Research Letters. (2020). doi:10.1016/j.frl.2020.101538 Retrieved from: https://repository.li.mahidol.ac.th/handle/20.500.14594/56171

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Title

The effect of co-opted directors on firm risk during a stressful time: Evidence from the financial crisis

Author(s)

Sirithida Chaivisuttangkun
 Pornsit Jiraporn

Other Contributor(s)

Penn State Great Valley
 Mahidol University

Abstract

© 2020 Elsevier Inc. Co-opted directors are those appointed after the incumbent CEO assumes office. Prior research shows that co-opted directors affect the quality of board monitoring. We explore how co-opted directors influence firm risk during a stressful time, focusing on the financial crisis of 2008. Firms with more co-opted directors experience significantly lower firm risk during the crisis. The results hold for total risk, idiosyncratic risk, and systematic risk. This corroborates the notion that, managers are inherently risk-averse, particularly so during the crisis. Co-opted directors allow managers to adopt corporate policies that reflect their own risk preferences, resulting in lower firm risk.

Keyword(s)

Economics, Econometrics and Finance

Availability

URI

https://repository.li.mahidol.ac.th/handle/20.500.14594/56171

Collections

Scopus 2020