Board Independence and Persistent Corporate Risk: A Review

Abstract

Purpose: It is traditionally presumed that oversight lower firm risk. This study examines the intricacies in which structures intended to enhance risk oversight may unintentionally introduce new risk. The novelty of this study lies in accentuating the instances where excessive oversight may create crisis and secondly disputing the intuition that independence is uniformly validated.

Research Design/Method/Approach: Integrating the agency, resource dependency and stewardship theories, this study embraced qualitative research approach, employing review of literatures.

Findings: The theoretical findings divulged that while board independence augment the organisation, its effectiveness is premised upon organisational nuances, board expertise, information quality and oversight intensity.

Originality: Empirical results on the effectiveness of oversight in risk mitigation remain inconclusive and blur. Emphasis has not been given to the monitoring myopia that accompany hyper surveillance. This study expands the body of knowledge by reframing board independence as a mechanism with hidden risk. It additionally contributed in introducing a balance frame work comprising of benefits and constraints of board independence.

Practical and Social Implications: Practically, independence does not automatically guarantee risk eradication, review of literatures suggests it can impede development in some instances. These consequences indicate the necessity of a sound governance design that mitigate against risk without constraining innovations and expansion. Future research should engage on longitudinal and context-specific empirical studies of these dynamics.