The Effect of Corporate Governance System Theory Tools on Financial Risk Using Generalized Method of Moments (GMM)

The purpose of this article is to investigate the effect of corporate governance system monitoring tools on the financial risk of companies listed on the Tehran Stock Exchange. The statistical sample of the study included ۱۲۷ companies during the period ۲۰۱۱ to ۲۰۱۸. In this study, three variables of credit risk, illiquidity risk and market risk were used as financial risk and the variables of ownership concentration, institutional ownership, board independence and board size were used as monitoring tools of the corporate governance system. Data were analyzed using unit root tests, kao and generalized method of moments using Eviews software. The results showed that institutional ownership has a significant effect on financial risks and reduces credit risk and illiquidity risk while increases market risk. The results also showed that the concentration of ownership, independency and size of the board had no significant effect on financial risks.Keywords: Credit Risk and Illiquidity Risk, Market Risk, Corporate Governance