Open AccessThe nexus between corporate governance, risk taking, and growth
Author(s) -
Alin Marius Andrieş,
Daniela Balutel,
Iulian Ihnatov,
Silviu Gabriel Ursu
Publication year - 2020
Publication title -
plos one
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.99
H-Index - 332
ISSN - 1932-6203
DOI - 10.1371/journal.pone.0228371
Subject(s) - corporate governance , nexus (standard) , financial crisis , business , index (typography) , investment (military) , shock (circulatory) , monetary economics , financial system , economics , finance , macroeconomics , embedded system , medicine , politics , world wide web , computer science , political science , law
In this study we assess the impact of corporate governance on the risk investment behavior of firms and its implications on firms’ growth rate. Using a sample of non-financial companies from 10 countries over a period leading to the recent global financial crisis, we documented that the corporate governance has a nonlinear (inverted U-shape) impact on the companies’ investment risk, meaning that the investment risk is increasing up to a level of corporate governance of 0.61 (as measured by our comprehensive index), while at higher levels of corporate governance the investment risk is decreasing. For the models of sales growth and assets growth it is shown that predicted investment risk has a positive effect on firms’ growth measures. Moreover, the two growth models are not moving independently and a shock to one of the growth measures (sales or assets) affects the other growth measure in the same direction. Additionally, we evaluated the effect of financial crisis on both the growth measures and the risk measure. The effect of financial crisis was captured in both measures in 2009, with higher impact on the growth of sales.