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

Highlights•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.•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.AbstractCo-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.

اثر مدیران مشترک در ریسک شرکت در طول یک زمان پر استرس: شواهدی از بحران مالی

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  • مقاله Finance
  • ترجمه مقاله Finance
  • مقاله مالی
  • ترجمه مقاله مالی
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