Non‐executive directors and corporate risk‐taking: Evidence from China

Abstract This study empirically examines the relationship between non‐executive directors and corporate risk‐taking. The findings show that non‐executive directors could significantly improve the risk‐taking level of corporations. Non‐executive directors reduce corporate agency costs and alleviate financing constraints, thus promoting a corporation's risk‐taking level. Further research shows that the positive impact of non‐executive directors on corporate risk‐taking is weakened by being state‐owned, higher executive incentives, better external supervision, higher ownership concentration, higher management age and greater uncertainty in the external environment. Additionally, non‐executive directors appointed by both controlling and non‐controlling shareholders play a positive role in promoting corporate risk‐taking.