Independent Directors and Risk Taking: Evidence from Listed US Insurance Companies
46 Pages Posted: 3 Apr 2013 Last revised: 28 Jun 2013
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Independent Directors and Risk Taking: Evidence from Listed US Insurance Companies
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: Suggested Citation
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