Board Effectiveness and Firm Risk

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Kaiser, L. (2020). Board Effectiveness and Firm Risk. Journal of Impact and ESG Investing, 1(2), 68-86.

Publication type

Article in Scientific Journal


This paper provides empirical evidence on the impact of board effectiveness on firm risk. We consider the Board Shareholder Confidence Index (BSCI) to proxy for board effectiveness of firms included in the S&P TSX Composite. Risk measures considered in this study include total risk, idiosyncratic risk, systematic risk and volatility-of-volatility. We report statistically significant negative relations between board effectiveness and alternative firm risk measures, except for systematic risk. This relation is particularly strong during periods of market distress. Considering analyst coverage and strategic ownership as competing monitoring channels for board effectiveness, we observe a substitution effect during normal market periods and a supplementary effect during periods of market distress when investors level of uncertainty is high and 'every little helps'. Our findings also add to the importance of corporate governance aspects in an ESG risk management framework.


Impact of Board Effectiveness on CSR and Firm Risk
FFF-Förderprojekt, January 2020 until August 2020 (finished)

The research project at hand sets a focus on the role of board effectives on a firm's corporate social responsibility (CSR) strategy and firm risk. As such, it contributes to the literature on ... more ...


Organizational Units

  • Chair in Business Administration, Banking and Financial Management
  • Risk Management
  • Institute for Finance

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