Download This PaperWhy Do Bank Boards Have Risk Committees?
Fisher College of Business Working Paper No. 2021-03-012
Charles A. Dice Center Working Paper No. 2021-12
European Corporate Governance Institute – Finance Working Paper No. 779/2021
Georgetown McDonough School of Business Research Paper No. 3893882
55 Pages Posted: 27 Jul 2021 Last revised: 10 Jan 2022
Date Written: July 26, 2021
Abstract
We develop a theory of bank board risk committees that explains why such committees can be valuable to shareholders even when they do not reduce bank risk. 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.
Keywords: Corporate Governance, Risk Committee, Bank Boards, Qualitative Research, Dodd-Frank
JEL Classification: G34
Suggested Citation: Suggested Citation
Rene M. Stulz (Contact Author)
Ohio State University (OSU) - Department of Finance ( email )
2100 Neil Avenue
Columbus, OH 43210-1144
United States
European Corporate Governance Institute (ECGI)
c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium
Rohan G. Williamson
Georgetown University - McDonough School of Business ( email )
3700 O Street, NW
Washington, DC 20057
United States
202-687-1404 (Phone)
202-687-4031 (Fax)
European Corporate Governance Institute (ECGI) ( email )
c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium