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

Subramaniam, Nava; McManus, Lisa; Zhang, Jian

doi:10.1108/02686900910948170

Cited by 156 publications

(222 citation statements)

References 40 publications

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“…In addition, risk committees could be expected to be even more important for firms in such industries that involve higher levels of uncertainty, or in other words, risk (Tao & Hutchinson, 2013). Similarly, Subramaniam et al (2009) show that the need for risk management committees varies with board size. Nkoko and Tesfaye (2014) www.ccsenet.org/ijef…”

Section: Early Determination Of Risk Committeesmentioning

confidence: 99%

Characteristics of Members of Board Committees at Borsa Istanbul

Arioglu

Tuan

2014

IJEF

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In this study, we investigate the characteristics of members of audit, risk and governance committees of boards in public firms quoted at Borsa Istanbul, with an emphasis on their educational backgrounds, professional expertise, independence, busyness, share ownership and managerial positions. Our findings show that a lower percentage of members of these committees, compared to non-members, serve as the chairmen of boards. In addition, a higher percentage of them are independent, have advanced educational degrees, and are professional experts such as accounting experts, lawyers, professors. The findings also show that members of these committees own fewer shares and serve on fewer outside boards. Interestingly, the findings show that a very low percentage of directors that do not serve on these committees are independent directors, leading to the question of what the underlying motivation for the inclusion of independent directors on boards of directors is.

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Section: Early Determination Of Risk Committeesmentioning

confidence: 99%

Characteristics of Members of Board Committees at Borsa Istanbul

Arioglu

Tuan

2014

IJEF

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“…Specifically, establishing corporate governance practices may flag the firms' commitment to better governance. As a result, it is expected to minimise any potential risk of investors' devaluation of the firm (Subramaniam, McManus and Zhang, 2009). There is no current mandatory regulatory requirement for establishing a RMC in Australia.…”

Section: Signalling Theorymentioning

confidence: 99%

“…In the first stage, a probit regression was conducted. The dependent variable was a RMC, and similar to previous research, the test included board size, CEO duality, and board independence, as the previous studies have indicated that these three variables influence firms' establishment of a RMC and separate RMC (Hines and Peters, 2015;Ling, Zain and Jaffar, 2014;Subramaniam, McManus and Zhang, 2009). Using the parameters from this model, the inverse Mills ratio was computed for all sample firms (Heckman, 1978;Johnston and DiNardo 1997).…”

Section: Heckman (1978) Test -Self-selection Bias (Endogenous Issues)mentioning

confidence: 99%

“…Similarly, Daly and Bocchino (2006) revealed that audit committee members feel that they have too much responsibility and do not have the time or inclination to oversee risk management. Time constraints and fatigue are more likely to occur in combined committees, which may consequently inhibit the committee members' desire and ability to undertake a more rigorous review of the various reports and processes and consequences that raise the potential for inefficiencies in risk management (Subramaniam, McManus and Zhang, 2009). …”

Section: Risk Management Committeementioning

confidence: 99%

“…Resources are beneficial to companies as they can enhance risk management strategies and strengths of a given firm (Hillman and Dalziel, 2003;Hillman, Withers and Collins, 2009 Generally, the risk management activities of a company can be overseen by one of the following three bodies: the board of directors, a combined RMC, and a separate RMC. Depending on firm-specific characteristics, such as board size, some companies oversee their risk matters by the entire board, while some companies delegate risk management responsibility to their audit committee, and a few companies form a separate committee to specifically manage their risks (Subramaniam, McManus and Zhang, 2009). …”

Section: Risk Management Committeementioning

confidence: 99%

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Does Firms' Risk Management Human Capital Reduce the Likelihood of Financial Distress?

Jia¹

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iii AbstractIn light of the corporate collapses and global financial crisis, risk management has been highlighted as an ever increasing important element of corporate governance.As risk management committees (RMC) bear the fundamental responsibility of risk management, RMCs' human capital performs a crucial role in risk management governance and warrants further investigation.The purpose of this study is to investigate the association between firms' RMC human capital and firms' management of risk, in terms of firm performance and the likelihood of financial distress. This study is motivated by the paucity of research on risk management governance and the Australian Security Exchange Corporate With respect to the association between RMCs, separate RMCs existence, and firms' management of risk in terms of firm performance and the likelihood of financial distress, the results revealed that the number of firms with a separate RMC remained stable over time, whereas there was an increasing trend of combined RMC establishment, and a decrease in the number of firms without a RMC. The regression results reveal that the existence of a RMC and a separate RMC were not significantly related to firm performance and the likelihood of financial distress. However, the findings show that the existence of a separate RMC moderated the relationship between firm risk and a firm's accounting performance. In terms of RMC human capital, the overall RMC human capital score was positively related to firm performance and market measurement of the likelihood of financial distress. With Does firms' risk management human capital reduce the likelihood of financial distress? v respect to individual RMC human capital characteristics, the total amount of experience (as a type of general human capital) was positively related to accounting performance, while RMC members' board tenure (as a type of firm-specific human capital) was negatively related to market performance.The findings make several important contributions. Firstly, this study contributes to the literature by providing empirical evidence about human capital theory from a risk management perspective, and draws on research to determine whether human capital is associated with firm performance and research that determines the association between risk management and firm performance. Secondly, this study informs policy setters about the current risk management practice in Australia, and provides implications for regulating risk management practices. Overall, the findings of this study highlight the importance of RMCs' human capital.

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Climate change performance and financial distress

et al. 2022

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Given the crucial role that environmental accounting plays in sustainable development, this study investigates the relationship between climate change disclosure performance (CCDP) and financial distress as well as the moderating impact of litigation, the existence of a risk committee, the employment of Big4 auditing firms and the level of audit fees. Utilising a sample of the top 300 Australian Securities Exchange (ASX)‐listed non‐financial firms over the period 2008–2019 and ordinary least squares (OLS) regression analysis with fixed effects, it is found that higher levels of CCDP are related to lower levels of financial distress. Additionally, the significant association between CCDP and financial distress is manifested in firms with low litigation risk, firms with a risk committee, firms that employ Big4 auditing firms and firms that incur a higher level of audit fees. Additional tests that mitigate self‐selection and endogeneity, such as propensity score matching (PSM) and the system generalised method of moments (GMM), show that our findings are robust. Finally, our findings shed light on managers' strategic behaviour in relation to the consideration of, and transparency around, climate change risks.

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

Cited by 156 publications

References 40 publications

Characteristics of Members of Board Committees at Borsa Istanbul

Characteristics of Members of Board Committees at Borsa Istanbul

Does Firms' Risk Management Human Capital Reduce the Likelihood of Financial Distress?

Climate change performance and financial distress

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