IDEAS home Printed from https://ideas.repec.org/a/pal/risman/v23y2021i1d10.1057_s41283-021-00073-8.html
   My bibliography  Save this article

Do risk management committee characteristics influence the market value of firms?

Author

Listed:
  • Masturah Malik

    (Universiti Utara Malaysia (UUM))

  • Rohami Shafie

    (Universiti Utara Malaysia (UUM))

  • Ku Nor Izah Ku Ismail

    (Universiti Utara Malaysia (UUM))

Abstract

This study aims to examine the effects of the risk management committee’s characteristics on the market performance of non-financial listed firms in Malaysia between 2015 and 2017. The regression result shows that risk management committee (RMC) size, independence, expertise and female RMC members have a substantial negative influence on firm performance. By employing a different measurement of expertise, further analysis shows that RMC members with risk management expertise have a significantly positive relationship with firm performance. The results suggest that RMC members with specific risk management expertise can promote efficient risk monitoring, thus, enhancing the value of firms compared to RMC members with only general financial and accounting backgrounds. Nevertheless, the results are the same for the female members of the RMC even though different measurements are used. The robust negative result is supported by the tokenism interpretation for female members in the risk management committee.

Suggested Citation

  • Masturah Malik & Rohami Shafie & Ku Nor Izah Ku Ismail, 2021. "Do risk management committee characteristics influence the market value of firms?," Risk Management, Palgrave Macmillan, vol. 23(1), pages 172-191, June.
    • Handle: RePEc:pal:risman:v:23:y:2021:i:1:d:10.1057_s41283-021-00073-8
    DOI: 10.1057/s41283-021-00073-8
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1057/s41283-021-00073-8
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1057/s41283-021-00073-8?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Kevin Campbell & Antonio Mínguez-Vera, 2008. "Gender Diversity in the Boardroom and Firm Financial Performance," Journal of Business Ethics, Springer, vol. 83(3), pages 435-451, December.
    2. Malik, Muhammad Farhan & Zaman, Mahbub & Buckby, Sherrena, 2020. "Enterprise risk management and firm performance: Role of the risk committee," Journal of Contemporary Accounting and Economics, Elsevier, vol. 16(1).
    3. Minton, Bernadette & Taillard, Jerome P. A. & Williamson, Rohan, 2010. "Do Independence and Financial Expertise of the Board Matter for Risk Taking and Performance?," Working Paper Series 2010-14, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    4. 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, vol. 24(4), pages 316-339, April.
    5. Pathan, Shams, 2009. "Strong boards, CEO power and bank risk-taking," Journal of Banking & Finance, Elsevier, vol. 33(7), pages 1340-1350, July.
    6. Ahmed Zemzem & Oumeima Kacem, 2014. "Risk Management, Board Characteristics and Performance in the Tunisian Lending Institutions," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 3(1), pages 186-200, January.
    7. Kenneth A. Borokhovich & Kelly R. Brunarski & Claire E. Crutchley & Betty J. Simkins, 2004. "Board Composition And Corporate Use Of Interest Rate Derivatives," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 27(2), pages 199-216, June.
    8. Nadia Loukil & Ouidad Yousfi, 2016. "Does gender diversity on corporate boards increase risk-taking?," Post-Print hal-02015753, HAL.
    9. Mark L. Defond & Rebecca N. Hann & Xuesong Hu, 2005. "Does the Market Value Financial Expertise on Audit Committees of Boards of Directors?," Journal of Accounting Research, Wiley Blackwell, vol. 43(2), pages 153-193, May.
    10. Dionne, Georges & Triki, Thouraya, 2005. "Risk management and corporate governance: The importance of independence and financial knowledge for the board and the audit committee," Working Papers 05-3, HEC Montreal, Canada Research Chair in Risk Management.
    11. Yueh-Cheng Wu & Qian Long Kweh & Wen-Min Lu & Noor Azlinna Azizan, 2016. "The impacts of risk-management committee characteristics and prestige on efficiency," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 67(6), pages 813-829, June.
    12. Klein, April, 1998. "Firm Performance and Board Committee Structure," Journal of Law and Economics, University of Chicago Press, vol. 41(1), pages 275-303, April.
    13. Gul, Ferdinand A. & Srinidhi, Bin & Ng, Anthony C., 2011. "Does board gender diversity improve the informativeness of stock prices?," Journal of Accounting and Economics, Elsevier, vol. 51(3), pages 314-338, April.
    14. Andrew Ellul & Vijay Yerramilli, 2013. "Stronger Risk Controls, Lower Risk: Evidence from U.S. Bank Holding Companies," Journal of Finance, American Finance Association, vol. 68(5), pages 1757-1803, October.
    15. Tao, Ngoc Bich & Hutchinson, Marion, 2013. "Corporate governance and risk management: The role of risk management and compensation committees," Journal of Contemporary Accounting and Economics, Elsevier, vol. 9(1), pages 83-99.
    16. Powell, Melanie & Ansic, David, 1997. "Gender differences in risk behaviour in financial decision-making: An experimental analysis," Journal of Economic Psychology, Elsevier, vol. 18(6), pages 605-628, November.
    17. Aebi, Vincent & Sabato, Gabriele & Schmid, Markus, 2012. "Risk management, corporate governance, and bank performance in the financial crisis," Journal of Banking & Finance, Elsevier, vol. 36(12), pages 3213-3226.
    18. Mariateresa Torchia & Andrea Calabrò & Morten Huse, 2011. "Women Directors on Corporate Boards: From Tokenism to Critical Mass," Journal of Business Ethics, Springer, vol. 102(2), pages 299-317, August.
    19. Adams, Renée B. & Ferreira, Daniel, 2009. "Women in the boardroom and their impact on governance and performance," Journal of Financial Economics, Elsevier, vol. 94(2), pages 291-309, November.
    20. Dwyer, Peggy D. & Gilkeson, James H. & List, John A., 2002. "Gender differences in revealed risk taking: evidence from mutual fund investors," Economics Letters, Elsevier, vol. 76(2), pages 151-158, July.
    21. Xie, Biao & Davidson, Wallace III & DaDalt, Peter J., 2003. "Earnings management and corporate governance: the role of the board and the audit committee," Journal of Corporate Finance, Elsevier, vol. 9(3), pages 295-316, June.
    22. Tuan-Hock Ng & Lee-Lee Chong & Hishamuddin Ismail, 2012. "Is the risk management committee only a procedural compliance?: An insight into managing risk taking among insurance companies in Malaysia," Journal of Risk Finance, Emerald Group Publishing, vol. 14(1), pages 71-86, December.
    23. Ahmed A. Elamer & Ismail Benyazid, 2018. "The impact of risk committee on financial performance of UK financial institutions," International Journal of Accounting and Finance, Inderscience Enterprises Ltd, vol. 8(2), pages 161-180.
    24. Azlan Amran & Abdul Manaf Rosli Bin & Bin Che Haat Mohd Hassan, 2008. "Risk reporting: An exploratory study on risk management disclosure in Malaysian annual reports," Managerial Auditing Journal, Emerald Group Publishing, vol. 24(1), pages 39-57, November.
    25. Nikos Vafeas, 2005. "Audit Committees, Boards, and the Quality of Reported Earnings," Contemporary Accounting Research, John Wiley & Sons, vol. 22(4), pages 1093-1122, December.
    26. Rubén Chavarín, 2020. "Risk governance, banks affiliated to business groups, and foreign ownership," Risk Management, Palgrave Macmillan, vol. 22(1), pages 1-37, March.
    27. Raymond S.Y. Chan & Charles K.S. Lau & Artie W. Ng, 2011. "Compliance and value relevance of audit committees: evidence from Hong Kong," Journal of Financial Reporting and Accounting, Emerald Group Publishing Limited, vol. 9(1), pages 74-97, July.
    28. Puan Yatim, 2010. "Board structures and the establishment of a risk management committee by Malaysian listed firms," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 14(1), pages 17-36, February.
    29. Laura de Zwaan & Jenny Stewart & Nava Subramaniam, 2011. "Internal audit involvement in enterprise risk management," Managerial Auditing Journal, Emerald Group Publishing, vol. 26(7), pages 586-604, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Na Xu & Wendong Lv & Junli Wang, 2023. "The Impact of Board Governance on Firm Risk among China’s A-Share Market-Listed Companies from 2010 to 2019," Sustainability, MDPI, vol. 15(5), pages 1-20, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Malik, Muhammad Farhan & Nowland, John & Buckby, Sherrena, 2021. "Voluntary adoption of board risk committees and financial constraints risk," International Review of Financial Analysis, Elsevier, vol. 73(C).
    2. Malik, Muhammad Farhan & Zaman, Mahbub & Buckby, Sherrena, 2020. "Enterprise risk management and firm performance: Role of the risk committee," Journal of Contemporary Accounting and Economics, Elsevier, vol. 16(1).
    3. Husam Aldamen & Janice Hollindale & Jennifer L. Ziegelmayer, 2018. "Female audit committee members and their influence on audit fees," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 58(1), pages 57-89, March.
    4. Andreas Seebeck & Julia Vetter, 2022. "Not Just a Gender Numbers Game: How Board Gender Diversity Affects Corporate Risk Disclosure," Journal of Business Ethics, Springer, vol. 177(2), pages 395-420, May.
    5. Catarina Fernandes & Jorge Farinha & Francisco Vitorino Martins & Cesario Mateus, 2018. "Bank governance and performance: a survey of the literature," Journal of Banking Regulation, Palgrave Macmillan, vol. 19(3), pages 236-256, July.
    6. Na Xu & Wendong Lv & Junli Wang, 2023. "The Impact of Board Governance on Firm Risk among China’s A-Share Market-Listed Companies from 2010 to 2019," Sustainability, MDPI, vol. 15(5), pages 1-20, February.
    7. Jimi Siekkinen, 2017. "Board characteristics and the value relevance of fair values," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 21(2), pages 435-471, June.
    8. Alharbi, Rana & Elnahass, Marwa & McLaren, Josie, 2022. "Women directors and market valuation: What are the “Wonder Woman” attributes in banking?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 80(C).
    9. Owen, Ann L. & Temesvary, Judit, 2018. "The performance effects of gender diversity on bank boards," Journal of Banking & Finance, Elsevier, vol. 90(C), pages 50-63.
    10. Camélia Radu & Nadia Smaili, 2022. "Board Gender Diversity and Corporate Response to Cyber Risk: Evidence from Cybersecurity Related Disclosure," Journal of Business Ethics, Springer, vol. 177(2), pages 351-374, May.
    11. Hidaya Lawati & Khaled Hussainey & Roza Sagitova, 2021. "Disclosure quality vis-à-vis disclosure quantity: Does audit committee matter in Omani financial institutions?," Review of Quantitative Finance and Accounting, Springer, vol. 57(2), pages 557-594, August.
    12. Zulkufly Ramly & Nurusysyifa Nordin, 2018. "Sharia Supervision Board, Board Independence, Risk Committee and Risk-taking of Islamic Banks in Malaysia," International Journal of Economics and Financial Issues, Econjournals, vol. 8(4), pages 290-300.
    13. Belaounia, Samia & Tao, Ran & Zhao, Hong, 2020. "Gender equality's impact on female directors’ efficacy: A multi-country study," International Business Review, Elsevier, vol. 29(5).
    14. Ghosh, Saibal, 2017. "Why is it a man’s world, after all? Women on bank boards in India," Economic Systems, Elsevier, vol. 41(1), pages 109-121.
    15. Green, Colin P. & Homroy, Swarnodeep, 2018. "Female directors, board committees and firm performance," European Economic Review, Elsevier, vol. 102(C), pages 19-38.
    16. Sikarwar, Ekta, 2022. "Board attributes, hedging activities and exchange rate risk: Multi-country firm-level evidence," Economic Modelling, Elsevier, vol. 110(C).
    17. Aruoriwo Marian Chijoke-Mgbame & Agyenim Boateng & Chijoke Oscar Mgbame, 2020. "Board gender diversity, audit committee and financial performance: evidence from Nigeria," Accounting Forum, Taylor & Francis Journals, vol. 44(3), pages 262-286, July.
    18. Sheila Ellwood & Javier Garcia-Lacalle, 2015. "The Influence of Presence and Position of Women on the Boards of Directors: The Case of NHS Foundation Trusts," Journal of Business Ethics, Springer, vol. 130(1), pages 69-84, August.
    19. Tao, Ngoc Bich & Hutchinson, Marion, 2013. "Corporate governance and risk management: The role of risk management and compensation committees," Journal of Contemporary Accounting and Economics, Elsevier, vol. 9(1), pages 83-99.
    20. Abid, Ammar & Gull, Ammar Ali & Hussain, Nazim & Nguyen, Duc Khuong, 2021. "Risk governance and bank risk-taking behavior: Evidence from Asian banks," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 75(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:risman:v:23:y:2021:i:1:d:10.1057_s41283-021-00073-8. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.