The Effect of Board Structure and Presence of Female 
              Directors on Corporate Risk Taking in the UK 
           
           Thesis submitted in accordance with the requirements of the 
          University of Liverpool for the degree of Doctor in Philosophy 
           
                          By 
                     Buthiena Kharabsheh 
                            
                            
              The University of Liverpool Management School 
                        May 2015 
           
                       
                                                                                                           Table of Contents 
                                               
                                              Table of Contents .................................................................................................................... ii 
                                              List of Tables .......................................................................................................................... v 
                                              List of Figures ....................................................................................................................... vii 
                                              Abstract ................................................................................................................................ viii 
                                              Declaration .............................................................................................................................. x 
                                              Copyright ............................................................................................................................... xi 
                                              Acknowledgements ............................................................................................................... xii 
                                              Dedication ............................................................................................................................ xiii 
                                              Chapter 1 ................................................................................................................................. 1 
                                              Overview of the Research ....................................................................................................... 1 
                                                  1.1 Introduction and Background........................................................................................ 1 
                                                  1.2 Motivation of the Study ................................................................................................ 8 
                                                  1.3 Objectives of the Study ............................................................................................... 11 
                                                  1.4 Contributions of the Study .......................................................................................... 16 
                                                  1.5 Structure of the Thesis ................................................................................................ 18 
                                              Chapter 2 ............................................................................................................................... 21 
                                              Literature Review .................................................................................................................. 21 
                                                  2.1 Introduction ................................................................................................................. 21 
                                                  2.2 Agency Theory ............................................................................................................ 22 
                                                       2.2.1 Sources of Conflict in the Agency Relationship .................................................. 26 
                                                       2.2.2 Supporting Theories of Agency Theory ............................................................... 33 
                                                           2.2.2.1 Stakeholder Theory ....................................................................................... 34 
                                                           2.2.2.2 Stewardship Theory ...................................................................................... 35 
                                                           2.2.2.3 Resource Dependence Theory ...................................................................... 38 
                                                       2.2.3 Agency Conflicts in the Financial Sector............................................................. 39 
                                                  2.3 The Board of Directors as a Governance Mechanism ................................................ 45 
                                                       2.3.1 Board Structure and Corporate Risk Taking ........................................................ 47 
                                                           2.3.1.1 Board Size and Corporate Risk Taking ......................................................... 52 
                                                           2.3.1.2 Board Independence and Corporate Risk Taking ......................................... 59 
                                                           2.3.1.3 CEO/Chairperson Duality and Corporate Risk Taking ................................. 64 
                                                       2.3.2 Board Structure and Corporate Risk Taking during the Recent Crisis ................ 68 
                                                  2.4 Female Directors on Corporate Boards ....................................................................... 71 
                                                       2.4.1 Importance of Gender Diversity .......................................................................... 72 
                                                       2.4.2 Female Directors and Corporate Risk Taking ...................................................... 77 
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            2.5 Summary ..................................................................................................................... 87 
           Chapter 3 ............................................................................................................................... 94 
           Research Methodology and Data .......................................................................................... 94 
            3.1 Introduction ................................................................................................................. 94 
            3.2 Research Philosophy ................................................................................................... 95 
            3.3 Data and Sample ....................................................................................................... 101 
             3.3.1 Sample for the Non-Financial Sector ................................................................. 101 
             3.3.2 Sample for the Financial Sector ......................................................................... 104 
            3.4 Description and Measurement of Variables .............................................................. 105 
             3.4.1 Measuring Corporate Risk Taking ..................................................................... 105 
             3.4.2 Key Explanatory Variables ................................................................................ 109 
             3.4.3 Control Variables ............................................................................................... 111 
            3.5 Descriptive Statistics ................................................................................................. 116 
            3.6 Correlation Matrix .................................................................................................... 119 
            3.7 Empirical Models ...................................................................................................... 124 
            3.8 Analytical Procedures ............................................................................................... 126 
             3.8.1 Panel Data .......................................................................................................... 127 
             3.8.2 Outliers ............................................................................................................... 128 
             3.8.3 Endogeneity ....................................................................................................... 129 
             3.8.4 Estimation Method ............................................................................................. 132 
            3.9 Summary ................................................................................................................... 136 
           Chapter 4 ............................................................................................................................. 137 
           Board Structure and Corporate Risk Taking ....................................................................... 137 
            4.1 Introduction ............................................................................................................... 137 
            4.2 Hypothesis Development .......................................................................................... 138 
             4.2.1 Board Size .......................................................................................................... 139 
             4.2.2 Board Independence ........................................................................................... 140 
             4.2.3 CEO/Chairperson Duality .................................................................................. 142 
            4.3 Descriptive Statistics ................................................................................................. 144 
            4.4 The Relationship between Board Structure and Corporate Risk Taking .................. 149 
             4.4.1 Number of Lags Required to Capture the Dynamic Effect ................................ 149 
             4.4.2 Board Structure, Firm Characteristics, and Past Corporate Risk Taking ........... 152 
             4.4.3 The Effect of Board Structure on Current Corporate Risk Taking .................... 160 
            4.5 Robustness Checks .................................................................................................... 170 
            4.6 Summary ................................................................................................................... 180 
           Chapter 5 ............................................................................................................................. 183 
           Female Participation on the Board of Directors and Corporate Risk Taking ..................... 183 
                              iii 
            
            5.1 Introduction ............................................................................................................... 183 
            5.2 Hypotheses Development ......................................................................................... 186 
            5.3 Descriptive Statistics ................................................................................................. 189 
            5.4 Empirical Results on the Relationship between Female Directors and Corporate Risk 
            Taking ............................................................................................................................. 193 
             5.4.1 Univariate Analysis ............................................................................................ 193 
             5.4.2 Main Regression Results .................................................................................... 194 
            5.5 Robustness Checks .................................................................................................... 205 
            5.6 Summary ................................................................................................................... 212 
           Chapter 6 ............................................................................................................................. 214 
           Board Structure, Female Participation on the board and Corporate Risk Taking during the 
           Recent Financial Crisis ....................................................................................................... 214 
            6.1 Introduction ............................................................................................................... 214 
            6.2 Hypotheses Development ......................................................................................... 216 
            6.3 Descriptive Statistics ................................................................................................. 219 
            6.4 Empirical Results ...................................................................................................... 224 
             6.4.1 Univariate Analyses ........................................................................................... 224 
             6.4.2 Main Regression Results .................................................................................... 227 
            6.5 Robustness Check ..................................................................................................... 233 
            6.6 Summary ................................................................................................................... 236 
           Chapter 7 ............................................................................................................................. 239 
           Summary and Conclusion ................................................................................................... 239 
            7.1 Introduction ............................................................................................................... 239 
            7.2 Restatement of the Research Questions .................................................................... 239 
            7.3 Summary of the Research Findings and Implications............................................... 240 
             7.3.1 The Effect of Board Structure on Corporate Risk Taking ................................. 241 
             7.3.2 The Effect of Female Participation on the Board and Corporate Risk Taking .. 244 
             7.3.3 The Effect of Board Structure, Female Participation on the Board and Corporate 
             Risk Taking during the Recent Financial Crisis ......................................................... 245 
             7.3.4 Implications of the Study Findings .................................................................... 246 
            7.4 Contributions............................................................................................................. 249 
            7.5 Limitations ................................................................................................................ 251 
            7.6 Key Areas for Future Research ................................................................................. 253 
           References ........................................................................................................................... 255 
            
                               
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