**2.3 Risk management, corporate governance**

Board sizes are responsible for the identification, assessment, and management of all types of risk, including operational risk, market risk, and liquidity risk (FRC2010b). The debate regarding this relationship, which has long been ignored as an important element in the process of development of the stock markets, minimizes the risk of investor. In this context, Minton et al. [12] found that the board size negatively affects the market risk. Similarly, in a recent study, Kryvko et al. [24] have examined the European banks and also found a negative relationship between the board size and the risk of the company.

Regarding the relationship between the independence of the board and the risk of liquidity, the first who examined the debate were Anderson et al. [25], who used the cost of the debt of the company as a proxy. They found that the more independent board is, the more the debt cost decreases. Pathan [26] found that the independent board is negatively associated with the market risk.

chairman also serving as CEO, CPA is audit size, PER is ROA, LEV is debt ratio, and

Directors, and VOL is stock return volatility, are the main factors of resistance of

In Eq. (5), INDD: present the independent directors CEO is chairman also

In this research, we use a dynamic panel data model of lagged levels of the dependent variables and for this reason; we utilize the Blundell and Bond [28] twostep system GMM methodology. This methodology is explained on the basis that traditional OLS estimator is biased in the presence of the lagged-dependent variable as regressor, and it also reports for the prospective endogeneity of certain depen-

**Table 1** presents the descriptive statistics for the regression variables. In this table, we can see "Mean", "standard deviation", "Min", and "Max". The stock return volatility showed the maximum standard deviation 1.67%, and there is also a much smaller standard deviation of 0.003%, with a mean of 39.86% and a

maximum of 1.16%. For an independent variable, the chairman also serving as CEO showed the maximum standard deviation of 48.16%, and there is also a much smaller standard deviation of 0%, with a mean of 63.56% and a maximum of 1%. The independent directors showed the maximum standard deviation of 13.32%, and there is also a much smaller standard deviation of 0%, with a mean of 1.04% and a maximum of 33.3%. The outside directors illustrate the standard deviation of 18.58%, and there is also a much smaller standard deviation of 5.55%, with a mean

Concerning the control variable, the audit size showed the maximum standard deviation of 13.52%, with a mean of 32.96% and a maximum of 1.2%. The debt ratio presents the maximum standard deviation of 81.03%, with a mean of 53.09% and a maximum of 65.553%. For the firm's size showed a standard deviation of 79.27%, with a mean of 6.48% and a maximum of 8.90%. We can see "Mean", "standard deviation", "Min", and "Max". Finally, the ROA presents the maximum standard deviation of 57.01%, and there is also a much smaller standard deviation of 6.95%,

Next, **Table 2** provides the correlation matrix for the dependent variable, stock return volatility, and all the independent variables. It also presents the correlation coefficients among the variables in our analysis. At first glance, it can be seen that

**Variables Obs Mean Std. dev. Min Max** Stock return volatility 623 0.3986773 0.1878925 0.0037603 1.167427 Chairman also serving as CEO 623 0.635634 0.4816386 0 1 Outsider directors (FD) 367 0.291568 0.1858492 0.055555 1.609438 Independent directors 623 1.04751 13.32312 0 0.333 Audit size 623 0.3296789 0.1352636 0 1.2 Relative ROA 623 0.072706 0.5701465 6.95 9.285 Debit ratio 623 53.09744 81.03811 110.45 65.553 Firm size 623 6.483938 0.7927428 0 8.904955

SIZE is firm size are included as instrumental variables (e.g., [17, 27]).

the company during the variations of the stock markets.

serving as CEO, FD is outside.

*The Primary Origin of the Financial Crisis DOI: http://dx.doi.org/10.5772/intechopen.86173*

*3.1.2 Empirical result and discussion*

of 29.16% and a maximum of 1.60%.

with a mean of 7.27% and a maximum of 9.28%.

dent variables.

**Table 1.**

**17**

*Summary statistics of corporate governance.*
