Corporate Risk and Corporate Governance

Abstract

This thesis investigates the effect of Gompers, et al.’s goverance index (gindex) and other possible factors on corporate risk. I find that corporate risk is significantly inversely-related with the gindex, which essentially gauges how extensively anti-takeover provisions are adopted by a firm, in both univarite and multivariate models. Firm size is the other variable significant in both univariate and multivariate models. Leverage and percentage of outsiders on the board are significantly related to firm riskiness when not controlling for other factors. Board percentage of voting power does not affect firm riskiness statistically. In summary, an inverse association between corporate risk and corporate governance using a proxy of anti-takeover provisions is confirmed in this thesis.