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Corporate governance, firm characteristics and risk management committee formation in Australian companies

Author

Listed:
  • Nava Subramaniam
  • Lisa McManus
  • Jiani Zhang

Abstract

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.

Suggested Citation

  • Nava Subramaniam & Lisa McManus & Jiani Zhang, 2009. "Corporate governance, firm characteristics and risk management committee formation in Australian companies," Managerial Auditing Journal, Emerald Group Publishing Limited, vol. 24(4), pages 316-339, April.
  • Handle: RePEc:eme:majpps:02686900910948170
    DOI: 10.1108/02686900910948170
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    Cited by:

    1. Sally Mohammed Farghaly Abdelaliem & Khalid M. Alharbi & Nadiah A. Baghdadi & Amer Malki, 2023. "Exploring the Impact of Private Companies’ Participation in Health-Related Programs through Corporate Sustainable Reporting," Sustainability, MDPI, vol. 15(7), pages 1-16, March.
    2. Ardianto Ardianto & Nadia Anridho & Suham Cahyono & Abu Hanifah Md. Noman Alam & Iman Harymawan, 2024. "The role of risk management committee on the relationship between corporate carbon emission disclosure and capital structure," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(3), pages 2127-2158, May.

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