AbstractThis thesis is comprised of three studies which explore governance and risk management issues of firms. The issues being addressed here are varied but connected to highlight "How uncertainties like geopolitical risk1, regulation interventions, or governance risk affecting the outcomes of organizations and how to model their impacts?". The following are the brief summaries of three studies:
(i) Proposing that the relationship between board diversity and firm outcomes stems from the theory of social interactions and information cost model, the first study (Chapter 2) examines the non-linear effects of board diversity. As a result, for firms with low information costs, an exogenous increase in the proportion of non-traditional directors should be associated with higher value and improved performance only when the number is greater than the token, whereas, for firms with high information costs, the change should be associated with lower value and worse performance only when the number is low. There is evidence that regulatory actions can alter the structure of these nonlinear effects significantly
in small and medium-sized businesses. Further analyses demonstrate that the departure of non-traditional board members in the post-SOX era is associated with fewer patents registered, higher company returns, and reduced stock volatility. (ii) The second study (Chapter 3) examine the effect of Regional Climate Action Plan Initiative (RAC ) and board diversity on environmental Corporate Social Responsibility ( CSR) performance. We demonstrate that RAC and SOX can have a substantial impact on environmental performance. Additionally, we uncover evidence supporting the concept that non-shareholder stakeholders are the primary drivers of environmental disclosure Since our analyses are centred on companies with very diverse boards, we emphasise the strategic significance that board diversity plays in regional climate initiatives. In addition, we demonstrate that businesses with less diverse boards are more likely to overinvest in environmental CSR during a financial crisis. This study demonstrates
the significance of factors other than market dynamics, such as local climate policy, in determining Environmental, Social, and Corporate Governance (ESG) disclosure.
(iii) The third study (Chapter 4) investigates the mechanism by which geopolitical risk influences firm innovation. Given existing notions that company investment is reduced during uncertain periods, we are inclined to investigate the interaction or moderating effects of abnormal R&D cutbacks during periods of high geopolitical risk to see how they affect in-house innovation. The findings indicate that REM and non-REM cutbacks have distinct patterns of influence on the environment. The results of our research provide credence to the existence of the corporate life-cycle hypothesis. Based on this theory, businesses that
engage in profit management in order to reduce their exposure to geopolitical risk are more likely to restrict innovation during the periods of birth and growth. We also find that a greater degree of participation by the US military in global geopolitical risk is connected with a lower level of innovation in businesses.
|Date of Award||29 Mar 2023|
|Supervisor||Dimitrios Gounopoulos (Supervisor) & David Newton (Supervisor)|