Risk Taking Behavior, Corporate Governance and Product Market Competition: Evidence From Pakistan
Abstract
This research aims to analyze the association of corporate governance and risk-taking behaviour with an interplay of product market competition. This paper covers the major aspects of corporate governance i.e. audit quality, board composition and ownership structure. Whereas, the risk-taking behavior and product market competition are measured through idiosyncratic risk and Herfindahl Hirschman Index respectively. Our study is based on secondary data of 281 Pakistan Stock Exchange (PSX) listed non-financial firms from 2011 to 2016. Consistent with agency theory, the results reveal that risk-taking behaviour is significantly affected by corporate governance. Moreover, product market competition moderates the relationship between corporate governance and risk-taking behavior.
Key Words: Corporate Governance; Risk Taking; Product Market Competition; Idiosyncratic Risk; Herfindahl Hirschman Index
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