The role of the board and the audit committee in corporate risk management

Vivian W. Tai, Yi-Hsun Lai and Tung-Hsiao Yang

The North American Journal of Economics and Finance, 2020, vol. 54, issue C

Abstract: This paper examines the impact of corporate governance on corporate risk-management activities in S&P 500 firms over the period 2004–2010 by measuring the characteristics of the board directors and audit committee. Our results show that the board of directors, especially the audit committee, plays an important role in the firm’s hedging decisions, including whether to hedge and to what extent. Such evidence is even stronger in high-leveraged firms with large risk-shifting incentives. These results are robust to the consideration of endogenous concerns, a board corporate governance index, and industrial effects. Our study contributes to the literature by showing the influential role of the audit committee on corporate risk management.

Keywords: Hedging; Risk-shifting; Derivatives; Risk management; Board; Corporate governance (search for similar items in EconPapers)
JEL-codes: G30 G32 G34 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:54:y:2020:i:c:s1062940818303930

DOI: 10.1016/j.najef.2018.11.008

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