Repay a Favor? Evidence from Co-opted Boards and Corporate Risk-Taking

Key Points

• Corporate risk-taking is significantly influenced by co-opted boards, altering traditional decision-making dynamics.
• Key evidence shows that companies with co-opted boards tend to take greater financial risks, reflecting a 20% increase in risk profiles.
• Observational analysis across various firms indicates how favors among board members impact corporate governance and strategies.
• These findings suggest that the interplay of board composition and personal relationships may drive financial outcomes, highlighting a need for governance reforms.