Corporate governance, firm characteristics and risk management committee formation in Australian companies
By N. Subramaniam, L. McManus, Jian Zhang. 2009
205 citations recorded by the source corpus.
Purpose - The purpose of this paper is to examine how a risk management committee (RMC), as a newly evolving sub-committee of the board of directors, functions as a key governance support mechanism in the oversight an organisation's risk management strategies, policies and processes. However, empirical evidence on the factors associated with the existence and the type of RMCs remains scant. Design/methodology/approach - Using an agency theory perspective, this study investigates the association between board factors such as proportion of non-executive directors, Chief Executive Officer duality, and board size; as well as, other firm-related factors (e.g. auditor type, industry, leverage, and complexity), and the existence of a RMC, and the type of RMC (namely, a separate RMC versus one that is combined with the audit committee). Data was collected from the annual reports of the top 300 Australian Stock Exchange (ASX)-listed companies. Findings - The results, based on logistic regression analyses, indicate that RMCs tend to exist in companies with an independent board chairman and larger boards. Further, the results also indicate that in comparison to companies with a combined RMC and audit committee, those with a separate RMC are more likely to have larger boards, higher financial reporting risk and lower organisational complexity. Research limitations/implications - Data limited to top 200 top ASX-listed companies, thus restricting generalisability of the results. Originality/value - The findings of this study provide additional information on the use and design of RMCs in a voluntary setting.
Subfields: Accounting
View Paper: https://www.semanticscholar.org/paper/3199eefcc3295cb056cca08ac6907d543cf508a8
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Citations in the corpus
- Does Corporate Governance Affect the Quality of Integrated Reporting? (2020, methodology): “According to de Villiers and Hsiao [74], IR engages in environmental, social, non-financial and financial and governance information in one report, to enhance the quality of information presented to the financial capital providers, for the purpose of making better decisions.”
- Corporate Governance and Risk Management: The Role of Risk Management and Compensation Committees (2013, unknown): “Agency theory suggests that there are divergent risk preferences of risk-neutral (diversified) shareholders and risk-averse managers which necessitates monitoring by the board (Jensen and Meckling, 1976; Subramaniam et al., 2009).”