Loading...
The Impact of Risk Committee on Financial Performance of UK Financial Institutions
Elamer, Ahmed A. Benyazid, I.
Elamer, Ahmed A.
Benyazid, I.
Publication Date
2018
End of Embargo
Supervisor
Rights
© 2018 Inderscience. Reproduced in accordance with the publisher's self-archiving policy.
Peer-Reviewed
Yes
Open Access status
openAccess
Accepted for publication
12/03/2018
Institution
Department
Awarded
Embargo end date
Collections
Additional title
Abstract
Following the recent financial crisis, Walker (2009) recommended that financial institutions should form a separate board level risk committee (RC) to manage various risks and prevent excessive risk taking. This research focuses on investigating how firms with separate risk committees differ from those that do not have one. The main research question we address is whether RCs have a fundamental influence on financial performance. We measure financial performance by ROA and ROE and we control for firm size, liquidity and gearing. Our sample consists of all listed financial institutions in FTSE-100 index from 2010 through 2014. Results indicate a negative relationship between risk committee characteristics (i.e., existence, size, independence, and meeting frequency) and financial performance. The results also indicate that firms without risk committee (RC) performed considerably well than firms with RC. The results are contradictory to Walker’s (2009) where RCs are recommended for their ability to mitigate and manage risks more expertly. However, we argue that establish strong RC constrain management ability to make excessive risk taking behaviour which may affect financial performance negatively. We contribute to the current research on the impact of risk committee governance attributes on financial performance after banking and governance reforms.
Version
Accepted manuscript
Citation
Elamer AA and Benyazid I (2018) The Impact of Risk Committee on Financial Performance of UK Financial Institutions. International Journal of Accounting and Finance. Vol 8(2): 161-180.
Link to publisher’s version
Link to published version
Link to Version of Record
Type
Article