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Audit committees’ oversight of bank risk-taking

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  • Sun, Jerry
  • Liu, Guoping
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    Abstract

    This study examines whether audit committee effectiveness affects bank risk-taking and risk management effectiveness. We find that banks with long board tenure audit committees have lower total risk and idiosyncratic risk, and banks with busy directors on their audit committees have higher total risk and idiosyncratic risk. These suggest that high audit committee effectiveness may constrain bank risk-taking activities. We also find that firm performance is more positively associated with bank risk for banks with long board tenure, more female audit committee members, or large size audit committees than for other banks, consistent with the notion that audit committee effectiveness may increase risk management effectiveness. However, this finding should be interpreted cautiously as it is contrary to the results on audit committee busyness.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Banking & Finance.

    Volume (Year): 40 (2014)
    Issue (Month): C ()
    Pages: 376-387

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    Handle: RePEc:eee:jbfina:v:40:y:2014:i:c:p:376-387

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    Web page: http://www.elsevier.com/locate/jbf

    Related research

    Keywords: Banks; Risk-taking; Risk management; Audit committees;

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