The board effectiveness index and stock price crash risk
ISSN: 0307-4358
Article publication date: 8 October 2021
Issue publication date: 3 January 2022
Abstract
Purpose
The main purpose of this study is to use a new broad board effectiveness index, which has been created from several internal attributes of board of directors and to investigate the association of the overall index regarding stock price crash risk.
Design/methodology/approach
The authors create a new board effectiveness index from a comprehensive set of board attributes, including the number of board meetings, the number of board attendances, the expertise of the directors, the size of the board and the number of independent directors, in order to test with the stock price crash risk by using panel regression models with fixed effects. The two-stage least squared regression ensures endogeneity issues.
Findings
An increase in board effectiveness index lowers firm-specific crash risk. Moreover, female directors enhance the board effectiveness.
Originality/value
With a new broad board effectiveness index, this paper is unique from other studies as the authors focus on the overall index rather than on a single dimension of board attributes.
Keywords
Citation
Wattanatorn, W. and Padungsaksawasdi, C. (2022), "The board effectiveness index and stock price crash risk", Managerial Finance, Vol. 48 No. 1, pp. 126-135. https://doi.org/10.1108/MF-04-2021-0150
Publisher
:Emerald Publishing Limited
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