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Sustainability 2017, 9(2), 173; doi:10.3390/su9020173

Approaches on Correlation between Board of Directors and Risk Management in Resilient Economies

1
Department of Finance, The Bucharest University of Economic Studies, 6 Piata Romana, Bucharest 010374, Romania
2
Department of Agro-Food and Environmental Economics, The Bucharest University of Economic Studies, 6 Piata Romana, Bucharest 010374, Romania
*
Author to whom correspondence should be addressed.
Academic Editors: Michael A. Peters, Hershey H. Friedman, Popescu H. Gheorghe, Panagiotis Mantalos, Linda Weiser Friedman and Andrei Jean Vasile
Received: 23 December 2016 / Revised: 15 January 2017 / Accepted: 22 January 2017 / Published: 25 January 2017
(This article belongs to the Special Issue Resilient Economics and the Regional Sustainable Economic Growth)
View Full-Text   |   Download PDF [440 KB, uploaded 25 January 2017]   |  

Abstract

The recent financial crisis highlighted the need for a strong emphasis on the effectiveness of board risk oversight practices. Good corporate governance upholds effective risk management, which in turn ensures the flexibility to reply to unpredicted threats and take benefit of opportunities. Thus, risk management affords corporate resilience that engenders competitive advantage due to the capacity to circumvent, deter, defend, react, and adjust to any kind of disturbance, besides recovering quickly. Guaranteeing that the board is prepared and adequately resilient to deal with a crisis circumstance is a crucial part of good governance. By employing a data set of companies listed in Romania, this paper analyzes whether boards of directors influence risk management. We measure boards by means of size, independence, diversity, establishment of Consultative Committees, as well as CEO duality, gender, age, and tenure. Based on ten financial ratios, we develop two risk indicators regarding shareholders’ wealth and short-term risk, alongside a global business failure risk tool, by means of principal component analysis. Furthermore, the output of the multivariate regression analysis show that CEO gender, the size of the board, and Audit Committee negatively influence business failure risk. View Full-Text
Keywords: resilience; board of directors; risk management; principal components analysis; multivariate regression analysis resilience; board of directors; risk management; principal components analysis; multivariate regression analysis
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MDPI and ACS Style

Armeanu, D.Ş.; Vintilă, G.; Gherghina, Ş.C.; Petrache, D.C. Approaches on Correlation between Board of Directors and Risk Management in Resilient Economies. Sustainability 2017, 9, 173.

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