Board Risk Committee, Corporate Governance Mechanisms, and Firm Value

Sharifah Faatihah Mohd Syed Fuzi (), Mohamat Sabri Hassan (), Romlah Jaffar () and Mohd Hafizuddin Syah Bangaan Abdullah ()
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Sharifah Faatihah Mohd Syed Fuzi: Universiti Teknologi MARA
Mohamat Sabri Hassan: Universiti Kebangsaan Malaysia
Romlah Jaffar: Universiti Kebangsaan Malaysia
Mohd Hafizuddin Syah Bangaan Abdullah: Universiti Kebangsaan Malaysia

A chapter in Corporate Governance and Sustainability, 2024, pp 3-25 from Springer

Abstract: Abstract The revised Malaysian Code of Corporate Governance 2017 highlights the director’s responsibility for risk management and internal control compared to the previous code, which fell under the audit committee, internal control, and internal audit function. Nevertheless, evidence indicates that the previous practices have been adopted, as the 2017 code is not mandatory. This chapter discusses evidence of the role of the board risk committee (BRC) in affecting the firm value. It extends the limited evidence, primarily focusing on the BRC effect, compared to previous risk management monitoring mechanisms and the inconclusive findings on the relationship between BRC and firms’ performance. Based on the agency theory, some corporate governance mechanisms might strengthen the relationship between BRC and firm value. Thus, this chapter explores the roles of three corporate governance mechanisms: board size, board independence, and auditor quality towards BRC–firm value relationship. Using a sample of the Top 100 publicly listed companies in Malaysia for 2014–2018, BRC positively influences firm value. In contrast to the previous evidence, this chapter shows that the joined role of the BRC and other board committees extends the positive influence of the BRC rather than the standalone BRC. Additionally, auditor quality using a proxy of BIG4 auditor can substitute the BRC functions in improving firm value due to the conflicting monitoring mechanism.

Keywords: Board characteristics; Risk management committee; Substitution theory; Firm value (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-981-97-7808-9_1

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DOI: 10.1007/978-981-97-7808-9_1

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