Corporate Governance, Risk-Taking, and Firm Performance : Evidence from Italy

Using a balanced panel data of 82 Italian listed companies, for 984 firm-year observations, the relationship between corporate governance, risk-taking, and risk-adjusted performance is investigated. The beta and the standard deviation, as proxies for risk-taking, and two different measures of risk-adjusted performance and Tobin's Q are used. Investigating the period 2002-2013, which includes both the pre-crisis time horizon and the one during the crisis, the result is a negative and statistically significant relationship between risk-taking and ownership concentration; conversely, there is a positive and statistically significant relationship between ownership concentration and risk-adjusted performance and with respect to Tobin's Q. However, instead of a definite linear relationship between risk-taking (risk-adjusted performance) and ownership structure, it seems to be a significant non-monotonic relationship. The independent directors seem to assume a positive (negative) sign with regard to the risk-adjusted performance (risk-taking) variables, and a wider board appears to be positively associated with both risk and the value of the firm