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Idiosyncratic Risk Return Skewness and Corporate Governance

Source
FirstTech Institutional Repository
Keywords
  • Panel Data Model
  • 風險管理
  • 公司治理
  • Risk Management
  • Corporate Governance
  • Panel Data Model

Abstract

[[abstract]]Most of prior studies mainly focus on whether the corporate governance mechanisms can reduce agency problems for improving firms’ performance and shareholders’ wealth However they pay less attention on how the quality of corporate governances impact on reducing firms’ risk This study investigates how both internal and external corporate governance mechanisms impact firms’ idiosyncratic risk return skewness based on the Taiwanese data We expect to find out the key corporate governance mechanisms which can reduce firms’ related risk This study takes the GARCH effects into consideration and further modifies the measurement of idiosyncratic risk proposed by Xu & Malkiel (2003); estimates the return skewness based on the methodologies of Bae et al (2006) By the way this study considers the internal and external corporate governances such like ownership structure board composition managerial incentive information transparency legal infrastructure and product market competition will be used to evidence how they impact on firms’ idiosyncratic risk and return skewness through our panel data model The contributions of this study are first find out the key corporate governance mechanisms that can reduce firms’ risk and improve firms’ risk management through investigating how the internal and external corporate governance mechanisms influence firms’ idiosyncratic risk and return skewness Second this study extends the studies in corporate governance and risk management and provides empirical evidences to the literature and suggestions to the market participants This study indicates that higher quality of internal corporate governance can decrease firms’ idiosyncratic risk make return distribution less negative skewed Hence we propose the corporate governance should be respected by Taiwan listed firm for reducing stock price volatility and avoiding the occurrence of negative extreme return

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