Purpose
This paper aims to examine how board composition, political connections and sustainability practices affect risk-taking and performance of firms.
Design/methodology/approach
This paper used secondary data and regression technique to analyse the relationship. A sample consisting of 290 firm-year observations was applied in the analysis.
Findings
The findings show that a larger board size contributes to greater financial risk; however, this risk can be reduced with more independent directors in the boardroom. An optimal board size with appropriate number of independent directors is desired, as a large board size can be harmful to firm performance. Politically connected firms also generate lower risk-taking and performance, and the double-edged sword effect of political connections needs to be considered. In terms of sustainability practices, firms have to engage in sustainable development to maximise the firms’ value, not ignoring the vital role of women in strategising business performance. However, the effect of sustainability practices on firms’ risk-taking is still not noticeable.
Research limitations/implications
Even though the sample size is not large because of the limited availability of data, the findings, to a certain extent, could be generalised to emerging markets, as most emerging markets do have similar financial and economic developments.
Practical implications
The findings from this paper can be used to support the implementation of sustainability practices, especially in those countries where sustainability initiatives are yet to be widely accepted.
Originality/value
This is one of the first few studies that examined the effect of non-financial information on risk-taking and performance of firms. This study concludes the positive effect of sustainability practices on firm performance.
Do political connections matter for firm innovation? Evidence from emerging markets in Central Asia and Eastern Europe