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Why do Bank Boards have Risk Committees?

Author

Listed:
  • René M. Stulz
  • James G. Tompkins
  • Rohan Williamson
  • Zhongxia (Shelly) Ye

Abstract

We develop a theory of bank board risk committees. With this theory, such committees are valuable even though there is no expectation that bank risk is lower if the bank has a well-functioning risk committee. As predicted by our theory (1) many large and complex banks voluntarily chose to have a risk committee before the Dodd-Frank Act forced bank holding companies with assets in excess of $10 billion to have a board risk committee, and (2) establishing a board risk committee does not reduce a bank’s risk on average. Using unique interview data, we show that the work of risk committees is consistent with our theory in part.

Suggested Citation

  • René M. Stulz & James G. Tompkins & Rohan Williamson & Zhongxia (Shelly) Ye, 2021. "Why do Bank Boards have Risk Committees?," NBER Working Papers 29106, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29106
    Note: CF
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    Cited by:

    1. Ding, Bin Yan & Wei, Feng, 2023. "Overlapping membership between risk management committee and audit committee and bank risk-taking: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 86(C).

    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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