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Audit committees’ oversight of bank risk-taking

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  • Sun, Jerry
  • Liu, Guoping

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.

Suggested Citation

  • Sun, Jerry & Liu, Guoping, 2014. "Audit committees’ oversight of bank risk-taking," Journal of Banking & Finance, Elsevier, vol. 40(C), pages 376-387.
  • Handle: RePEc:eee:jbfina:v:40:y:2014:i:c:p:376-387
    DOI: 10.1016/j.jbankfin.2013.12.015
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    Cited by:

    1. repec:eee:jbrese:v:76:y:2017:i:c:p:52-66 is not listed on IDEAS
    2. repec:kap:regeco:v:53:y:2018:i:1:d:10.1007_s11149-017-9340-z is not listed on IDEAS
    3. repec:fan:macoma:v:html10.3280/maco2017-002007 is not listed on IDEAS

    More about this item

    Keywords

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

    JEL classification:

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

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