The IUP Journal of Accounting Research and Audit Practices:
Board Experience, Corporate Risk-Taking and Going Concern: Evidence from South Africa

Article Details
Pub. Date : Jan, 2020
Product Name : The IUP Journal of Accounting Research and Audit Practices
Product Type : Article
Product Code : IJARAP32002
Author Name : Joseph Olorunfemi Akande, Olayinka Moses, Dev Tewari
Availability : YES
Subject/Domain : Finance
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No. of Pages : 35

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Abstract

Experience is arguably one of the most prominent corporate governance attributes, yet studies investigating traits of corporate governance in mitigating risk-taking behavior have ignored board experience. Using the Bayesian analytical method, the present study analyzes multivariate models of corporate governance attribute (i.e., board experience), corporate risk-taking and going concern of Johannesburg Stock Exchange (JSE) listed firms. The paper finds the sampled firms' board experience to be a key attribute that influences firm's risk-taking and going concern. Additionally, it finds that firms' risk-taking behavior significantly impacts their going concern prospects. The findings suggest the need for a better repositioning of corporate governance in the light of board experience.


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Fundamentally, corporate governance is based on the expectation that good governance mechanism is able to limit managers' opportunistic and excessive risk-taking behavior (Koerniadi et al., 2014; Balachandran and Faff, 2015; and Wang et al., 2015). Literature suggests that corporate governance practices drive firm value, and firms' specific risks play a significant role in achieving economic success for firms (Nguyen, 2011; and Koerniadi et al., 2014). Empirically, corporate governance and firm value have been found to be related, with the relationship varied and some instances dependent on the corporate governance attributes employed. In particular, studies (e.g., Balasubramanian et al., 2010; Ammann et al., 2011; Shank et al., 2013; and Ntim, 2015) have documented evidence suggesting the direct relationship between corporate governance and firm value. Other studies have equally shown that different corporate governance attributes relate differently with firm value (Black et al., 2006a; Francis et al., 2012; and Liu et al., 2012). For instance,


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