Audit committees’ oversight of bank risk-taking

Jerry Sun and Guoping Liu

Journal of Banking & Finance, 2014, vol. 40, issue C, 376-387

Abstract: This study examines whether audit committee effectiveness affects bank risk-taking and risk management effectiveness. We find that banks with long board tenure audit committees have lower total risk and idiosyncratic risk, and banks with busy directors on their audit committees have higher total risk and idiosyncratic risk. These suggest that high audit committee effectiveness may constrain bank risk-taking activities. We also find that firm performance is more positively associated with bank risk for banks with long board tenure, more female audit committee members, or large size audit committees than for other banks, consistent with the notion that audit committee effectiveness may increase risk management effectiveness. However, this finding should be interpreted cautiously as it is contrary to the results on audit committee busyness.

Keywords: Banks; Risk-taking; Risk management; Audit committees (search for similar items in EconPapers)
JEL-codes: G21 G34 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:40:y:2014:i:c:p:376-387

DOI: 10.1016/j.jbankfin.2013.12.015

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