A Research on Corporate Governance, Risk Taking Behavior, and Performance

Risk taking is inescapable in running businesses because managers have to make decisions in face of uncertainty about the future. Risk taking can not be avoided, and is likely to be closely related to performance and/or managerial efficiency. Further, risk taking behavior can be interpreted from the point of view of corporate governance: different governance is expected to bring different results from risk corporate taking behavior. This idea is based on agency theory. Using data from KRX listed non-financial companies (years 2008-2017) we try to test some research questions on whether corporate risk taking leads to different corporate performance, or whether different governance bring about different results from risk corporate taking behavior. Based on the tests, we document that risk taking behavior leads to significant difference of corporate performance, and that risk taking under restriction of governance leads to significantly different corporate performance. So, we suggest that corporate performance and/or managerial efficiency is significantly related to corporate risk taking behavior and governance.