Board structure and corporate R&D intensity: evidence from Forbes global 2000

What is it about?

Purpose – This study seeks to examine the impact of board structure on risk-taking measured by R&D intensity in OECD countries. Design/methodology/approach – The study uses a panel data of 200 companies on Forbes Global 2000 over the 2010- 2014 period. It employs the ordinary least square multiple regression analysis technique to examine the hypotheses. Findings - The results show that the frequency of board meetings and board size are significantly and negatively related to risk-taking measured by R&D intensity, with a greater significance among Anglo American countries than among Continental European countries. The rationale for this is that the legal and accounting systems in the Anglo-American countries have greater protection through greater emphasis on compliance and disclosure and therefore allowing for less risk-taking. Research limitations/ implications – The results suggest that better-governed firms at firm- or national-level have a high expectancy of less risk-taking. These results offer regulators a resilient incentive to pursue corporate governance and disclosure reforms officially and mutually with national-level governance. Thus, these results show the monitoring and legitimacy benefits of governance, resulting in less risk-taking. Lastly, the findings offer investors the opportunity to build specific expectations about risk-taking behavior in terms of R&D intensity in OECD countries. Future research could investigate risk-taking using different arrangement, conducting face-to-face meetings with the firm’s directors and shareholders. Originality / value – This study extends, as well as contributes to the extant CG literature, by offering new evidence on the effect of board structure on risk-taking. The findings will help policymakers in different countries in estimating the sufficiency of the available CG reforms to prevent management mishandle and disgrace.

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