Background of Independent Directors and Risk Aversion

This study empirically tests the prediction that independent directors with different backgrounds have different risk awareness on listed companies, by using the dataset of resignation of independent directors of China’s listed companies during the years of 2002 and 2005 as targeted samples. We find that independent directors with accounting background are more sensitive to earning management, while independent directors with intermediary agency background are more sensitive to event risk, and independent directors with entity or academic research background are more sensitive to tunneling risk. Our study also finds that the reputation of independent directors has no significant impact on risk aversion, but independent directors with higher education background have stronger risk awareness.