Board change and firm risk: Do new directors mean unstable corporate policies?
研究发现任命新董事会导致公司风险增加，尤其是当新董事占比超过30%时，风险显著上升约两年，且公司政策一致性降低。
Abstract Research Question/Issue Given the contentious debate over whether the appointment of new directors reduces firm risk, this study explores the effect of board changes on firm risk. Research Findings/Insights Appointing new directors leads to firm risk. A regression kink design shows that boards with more than 30% of new directors experience a significant increase in firm risk for approximately two years. Moreover, the effect of new directors on firm risk is more pronounced for firms with weaker corporate governance mechanisms but is attenuated if the demographic gaps between the new and existing directors are relatively larger. Additionally, the effect is moderated when new directors have interlocking and academic experience. Further analysis reveals that the appointment of new directors is associated with less consistent corporate policies. Theoretical/Academic Implications We extend the theory of dynamic board governance, providing a qualitative and quantitative description of the effect of board change via a regression kink design, which shows that board change is an important variable that upsets the balance of board governance, leads to higher volatility of corporate policies, and increases the risk of corporate operations. Practitioner/Policy Implications The findings suggest that corporate management should carefully assess the risk of board change. A large proportion of new director involvement can create challenges in communication, understanding, and cooperation, leading to inconsistent corporate strategies and policies, thus increasing operating volatility. Moreover, this study offers insights to policymakers rethinking board spills in their countries.