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Risk Committee, Firm Life Cycle, and Market Risk Disclosures

Risk Committee, Firm Life Cycle, and Market Risk Disclosures Manuscript Type Empirical Research Question/Issue This study investigates whether the existence of a separate risk committee and risk committee characteristics are associated with market risk disclosures. It also tests whether the role of a risk committee in affecting market risk disclosures varies for different firm life cycle stages. Research Findings/Insights Using 677 firm‐year observations of financial firms from Gulf Cooperation Council (GCC) countries during the years 2007–2011, we find that firms with a separate risk committee are associated with greater market risk disclosures, an effect that is more pronounced for mature‐stage firms. Furthermore, findings suggest that risk committee qualifications and size have a significant positive impact on market risk disclosures. Theoretical/Academic Implications This study complements the corporate governance literature by incorporating agency theory, legitimacy theory, stakeholder theory, and the resource‐based theory to provide more robust evidence of the impact of a separate risk committee and the firm life cycle on market risk disclosures. Our results support the monitoring effect of a separate risk committee and suggest that a separate risk committee can improve “firm‐level corporate governance” in the GCC countries characterized by a poor informational environment. Practitioner/Policy Implications Findings from this study provide evidence that the existence, qualifications, and size of risk committees may be used as a channel to improve the disclosure level, suggesting a policy prescription for regulators and policymakers. Investors may also find these results useful in forming their own expectations about firm‐level risk disclosures. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Corporate Governance Wiley

Risk Committee, Firm Life Cycle, and Market Risk Disclosures

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References (148)

Publisher
Wiley
Copyright
© 2016 John Wiley & Sons Ltd
ISSN
0964-8410
eISSN
1467-8683
DOI
10.1111/corg.12115
Publisher site
See Article on Publisher Site

Abstract

Manuscript Type Empirical Research Question/Issue This study investigates whether the existence of a separate risk committee and risk committee characteristics are associated with market risk disclosures. It also tests whether the role of a risk committee in affecting market risk disclosures varies for different firm life cycle stages. Research Findings/Insights Using 677 firm‐year observations of financial firms from Gulf Cooperation Council (GCC) countries during the years 2007–2011, we find that firms with a separate risk committee are associated with greater market risk disclosures, an effect that is more pronounced for mature‐stage firms. Furthermore, findings suggest that risk committee qualifications and size have a significant positive impact on market risk disclosures. Theoretical/Academic Implications This study complements the corporate governance literature by incorporating agency theory, legitimacy theory, stakeholder theory, and the resource‐based theory to provide more robust evidence of the impact of a separate risk committee and the firm life cycle on market risk disclosures. Our results support the monitoring effect of a separate risk committee and suggest that a separate risk committee can improve “firm‐level corporate governance” in the GCC countries characterized by a poor informational environment. Practitioner/Policy Implications Findings from this study provide evidence that the existence, qualifications, and size of risk committees may be used as a channel to improve the disclosure level, suggesting a policy prescription for regulators and policymakers. Investors may also find these results useful in forming their own expectations about firm‐level risk disclosures.

Journal

Corporate GovernanceWiley

Published: Mar 1, 2016

Keywords: ; ; ;

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