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Risk Management Committee Attributes and Firm Performance

Listed author(s):
  • Basiru Salisu Kallamu
Registered author(s):

    We investigate the impact of risk management committee attributes on firm performance for a sample of 37 finance companies listed on the Malaysian stock exchange covering period from 2007 financial year to 2011. The result indicates that a committee composed of majority independent directors positively enhances firm market valuation and negatively affects accounting returns. Independent committee chair was found to positively enhance accounting returns while prior executive experience of directors enhances both accounting returns and market valuation of the companies. Lastly, presence of executive on RMC shows a significant negative relationship with ROA. The result supports agency theory which suggests that independent directors are in a better position to monitor the executive and protect the interest of the various stakeholders. In addition, the result suggests that regulatory agencies should consider recommending finance companies to have directors with prior executive experience to serve on risk management committee.

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    File URL: http://www.macrothink.org/journal/index.php/ifb/article/view/8580/7132
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    File URL: http://www.macrothink.org/journal/index.php/ifb/article/view/8580
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    Article provided by Macrothink Institute in its journal International Finance and Banking.

    Volume (Year): 2 (2015)
    Issue (Month): 2 (December)
    Pages: 1-24

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    Handle: RePEc:mth:ifb888:v:2:y:2015:i:2:p:1-24
    Contact details of provider: Web page: http://ifb.macrothink.org

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    1. Tuan-Hock Ng, 2013. "Is the risk management committee only a procedural compliance?," Journal of Risk Finance, Emerald Group Publishing, vol. 14(1), pages 71-86, February.
    2. Nava Subramaniam, 2009. "Corporate governance, firm characteristics and risk management committee formation in Australian companies," Managerial Auditing Journal, Emerald Group Publishing, vol. 24(4), pages 316-339, April.
    3. Klein, April, 1998. "Firm Performance and Board Committee Structure," Journal of Law and Economics, University of Chicago Press, vol. 41(1), pages 275-303, April.
    4. Beasley, Mark S. & Clune, Richard & Hermanson, Dana R., 2005. "Enterprise risk management: An empirical analysis of factors associated with the extent of implementation," Journal of Accounting and Public Policy, Elsevier, vol. 24(6), pages 521-531.
    5. Aguilera, Ruth V. & Desender, Kurt A. & Kabbach de Castro, Luiz Ricardo, 2011. "A Configurational Approach to Comparative Corporate Governance," Working Papers 11-0103, University of Illinois at Urbana-Champaign, College of Business.
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