Lead Independent Director, Managerial Risk-Taking and Cost of Debt : Evidence from UK

We extend the existing literature on how the adoption of a lead independent director is related to corporate outcomes by documenting that the presence of a lead independent director on the board is significantly and negatively related to managerial risk-taking. The result is more pronounced for firms with a non-independent board chair. In a further analysis, we document that decreased managerial risk-taking leads to a reduction in cost of debt for firms with a lead independent director on the board. Overall, our results suggest that the adoption of a lead independent director is an effective governance mechanism when the board chair is not independent, which supports the motivation of the UK corporate governance code