Journal of Applied Finance & Banking

The Economic Freedom, Corporate Governance and Risk-taking Behavior: Evidence from the European Life Insurance Industry

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  • Abstract

    Prior studies have documented that risk-taking behavior is a determinant of firm-level corporate governance. However, the country-level corporate governance to risk-taking behavior has not been well examined. The main topic of this study not only intends to examine the relation between corporate governance and risk taking behavior but also investigates whether this relation can be influenced by the economic freedom. Using a sample of 552 EU life insurers over 19952016 periods, consistent with the expectation, the results support that insurers with good corporate governance tend to take risk-taking, and those with higher economic freedom dependence tend to maintain higher risk-taking. In addition, firms in high economic freedom countries have more opportunities to take risk, further have significant negatively relationship between country-level risk-taking behavior and shareholder ownership concentration. Given that better corporate governance is instrumental in taking risk, firms in high economic freedom countries have more opportunities to risk taking.


    JEL classification numbers: G22, G32

    Keywords: Corporate Governance, Economic Freedom, Risk-taking Behavior.