Why do Bank Boards have Risk Committees?

René M. Stulz, James G. Tompkins, Rohan Williamson and Zhongxia (Shelly) Ye

No 29106, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We develop a theory of bank board risk committees. With this theory, such committees are valuable even though there is no expectation that bank risk is lower if the bank has a well-functioning risk committee. As predicted by our theory (1) many large and complex banks voluntarily chose to have a risk committee before the Dodd-Frank Act forced bank holding companies with assets in excess of $10 billion to have a board risk committee, and (2) establishing a board risk committee does not reduce a bank’s risk on average. Using unique interview data, we show that the work of risk committees is consistent with our theory in part.

JEL-codes: G21 G28 G34 (search for similar items in EconPapers)
Date: 2021-07
New Economics Papers: this item is included in nep-ban, nep-isf and nep-rmg
Note: CF
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Citations: View citations in EconPapers (2)

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