Corporate governance and risk taking with moderating role of product market competition

Abstract

This research explores the association of corporate governance and firms risk-taking ability and how this relationship has been moderated by product market competition. Corporate governance covers key areas such as board structure, ownership structure and audit quality. The research uses CapM by William Sharpe to measured idiosyncratic risk, and Herfindahl Hirschman Index to measure product market competition. Using a sample of 281 nonfinancial firms from 2011 to 2016, this study uses both Static and Dynamic Data-Estimation regression approach to uncover the relationship. Results revealed that the corporate governance significantly impact the firm’s risk taking ability and product market competition moderates the relationship between corporate governance and idiosyncratic risk.