Risk Committee, Corporate Risk-Taking, and Firm Value

Managerial Finance, 2020

42 Pages Posted: 16 Oct 2020 Last revised: 18 Oct 2020

See all articles by Md. Borhan Uddin Bhuiyan

Md. Borhan Uddin Bhuiyan

Massey University; affiliation not provided to SSRN

Muhammad A. Cheema

University of Otago New Zealand

Yimei Man

University of Waikato, Management School

Date Written: August 26, 2020

Abstract

Purpose: We empirically examine the impact of the stand-alone risk committee on corporate risk-taking and firm value.

Design/methodology/approach: We argue that the existence of a stand-alone risk committee enhances the quality of corporate governance, which reduces corporate risk-taking and strengthens the firm value that might improve investor protection.

Findings: We find several measures of risk-taking decline significantly for firms that have a stand-alone risk committee compared with firms that have a joint audit and risk committee. We also find that the presence of a stand-alone risk committee is positively associated with firm value.

Practical implications: The evidence is consistent with the proposition that firms with a stand-alone risk committee can effectively evaluate potential risks and implement a proper risk management system.

Originality: This is the first paper that investigates the association between the existence of a stand-alone risk committee and firm risk-taking in a multi-industry setting. Also, our research extends the association between a stand-alone risk committee and firm value.

Keywords: Stand-Alone Risk Committee; Corporate Risk-Taking; Firm Value; Australia

JEL Classification: G30, G32, G34

Suggested Citation

Bhuiyan, Md. Borhan Uddin and Bhuiyan, Md. Borhan Uddin and Cheema, Muhammad A. and Man, Yimei, Risk Committee, Corporate Risk-Taking, and Firm Value (August 26, 2020). Managerial Finance, 2020, Available at SSRN: https://ssrn.com/abstract=3681601 or http://dx.doi.org/10.2139/ssrn.3681601

Md. Borhan Uddin Bhuiyan

Massey University ( email )

School of Accountancy
Auckland, AK Auckland 0745
New Zealand
+6494140800 (Phone)

affiliation not provided to SSRN

Muhammad A. Cheema (Contact Author)

University of Otago New Zealand ( email )

Dunedin, 9016
New Zealand

Yimei Man

University of Waikato, Management School ( email )

Hamilton
New Zealand

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