Corporate governance reform and risk-taking: evidence from a quasi-natural experiment in an emerging market

Research output: Contribution to journalArticle



Existing studies suggest that stricter Corporate Governance Reform (CGR) reduces corporate risk-taking, primarily due to higher compliance costs and expanded liabilities of insiders or managers. We revisit the relationship between CGR and risk-taking in an emerging market set-up characterized by weaker market forces of corporate scrutiny and greater insider ownership, which encourages firms to pursue investment conservatism. Using a quasi-natural experiment, we find that stricter CGR leads to greater corporate risk-taking. We further show that risk-taking is an important channel through which CGR enhances firm value. Our findings support the view that stricter CGR can have a positive effect on corporate risk-taking and corporate investment decisions in an evolving regulatory environment.


Original languageEnglish
JournalJournal of Corporate Finance
Early online date22 Aug 2018
Publication statusE-pub ahead of print - 22 Aug 2018


  • Corporate governance reform, Risk-taking, Emerging market, Quasi-natural experiment