Risk Governance and Bank Performance

Global discourse is geared towards greater accountability and regulatory oversight of banks to promote sound financial systems and charter value. The authors applied dynamic pool panel analysis to investigate the relationship between risk governance and financial performance among African global banks spanning the years 2015 to 2020. They find significant positive association between financial experts on risk committee and bank profitability. The results further reveal that risk committee activism as a proxy for risk committee effectiveness significantly increase bank profitability. Therefore, stakeholders must prioritize regular risk committee meetings and attach importance to risk committee compositions with finance experts on the majority. Additionally, this study offers policy implications for regulators and bank mangers to clearly define risk committee financial experts and minimum financial experts required to serve on the risk committee.

Corporate Governance Practices and Disclosure of Risk Management Sharia Bank in Asean

The risks faced by Islamic banks are similar to conventional banks. Therefore, Sharia Banks must also carry out risk management disclosures. This study aims to examine the effect of governance, including the Sharia Supervisory Board, Independent Commissioner, Audit Committee, Risk Committee, the doubling of the Sharia Supervisory Board Position, and the frequency of meetings on the quality of risk management disclosures. The population is Sharia Banks in ASEAN; samples are selected purposively according to the data's completeness that can be accessed through the capital market website. Risk management disclosures are measured using the index of completeness of risk items revealed. Data analysis was performed using multiple regression analysis. The study found that the number of audit committees and meeting frequency had a significant and positive effect on the quality of risk management disclosures. The number of Sharia supervisory boards has a significant effect on the negative coefficient. Other governance variables do not affect risk management disclosures.Keywords: Sharia Bank, Corporate Governance, Risk Management, Disclosure.Abstrak. Risiko yang dihadapi bank syariah hampir sama dengan bank konvensional. Oleh karena itu, Bank Syariah juga wajib melakukan pengungkapan manajemen risiko. Penelitian ini bertujuan untuk menguji pengaruh tata kelola antara lain Dewan Pengawas Syariah, Komisaris Independen, Komite Audit, Komite Risiko, penggandaan Jabatan Dewan Pengawas Syariah, dan frekuensi rapat terhadap kualitas pengungkapan manajemen risiko. Populasinya adalah Bank Syariah di ASEAN. Sampel dipilih secara purposif sesuai dengan kelengkapan data yang dapat diakses melalui website pasar modal. Pengungkapan manajemen risiko diukur dengan menggunakan indeks kelengkapan item risiko yang diungkap. Analisis data dilakukan dengan menggunakan analisis regresi berganda. Hasil penelitian menyimpulkan bahwa jumlah komite audit dan frekuensi rapat berpengaruh signifikan dan positif terhadap kualitas pengungkapan manajemen risiko. Jumlah dewan pengawas syariah berpengaruh signifikan dengan koefisien negatif. Variabel tata kelola lainnya tidak mempengaruhi pengungkapan manajemen risiko.Kata Kunci: Bank Syariah, Tata Kelola Perusahaan, Manajemen Risiko, Pengungkapan.

The Effectiveness of The Risk Committee, Political Relations and Company Performance in the Banking Industry in Indonesia

This study aims to analyze the relationship between the effectiveness of the risk committee, political relations and company performance in the banking industry in Indonesia which is listed on the Indonesia Stock Exchange (BEI). The data were obtained using purposive sampling, so that 41 companies were obtained for 2017 to 2019 using the Stata analysis tool. The results of this study indicate a significant positive effect between the total risk committee members on company performance as proxied by ROA. In addition, the existence of a political relationship as a moderator indicates a negative influence between the number of meetings and concurrent positions in the risk committee on company performance with the proxy of ROA. In order to improve company performance, the risk committee must increase the number of members in the risk committee so that they can exchange ideas to solve company problems. Furthermore, political relations have a negative impact on company performance. Spending more money to win business projects and government licensing can increase costs which can directly reduce company performance.

Governance and risk-taking in conventional and Islamic banks

PurposeThe purpose of this study is to examine the relationship of the board and risk committee in respect of risk-taking in conventional and Islamic banks in Malaysia.Design/methodology/approachThis study uses unbalanced panel data for 15 conventional and 14 Islamic banks over the period 2007–2016. The generalised least squares random effects technique is applied.FindingsThe evidence shows that independent directors and frequency of board meetings reduce risk-taking but that the number of directors with finance and banking experience and those with multiple directorships tend to increase risk-taking. The findings also indicate that the size of the risk committee, the number of directors on the risk committee and the appointment of a designated risk officer tends to reduce risk-taking in banks. By comparing conventional and Islamic banks, the findings show that Islamic banks have lower exposure to portfolio risk but higher insolvency risk.Practical implicationsThe findings in this study suggest that the board and risk committee have an impact on bank risk-taking. The implications for management include having more independent directors, fewer directors with multiple board memberships and having an efficient risk committee in order to reduce risks. Regulators should look into the issue of multiple directorships as this is positively related to risk-taking. Islamic banks should expand their operations as our findings indicate that bigger banks are better able to manage risk.Originality/valueThis study covers bank governance and risk committee, which are crucial in influencing the risk-taking behaviour of conventional and Islamic banks.

RISK GOVERNANCE AND FINANCIAL PERFORMANCE: AN EMPIRICAL ANALYSIS

This study examines the influence of risk governance on financial performance of 50 quoted firms in the Nigerian financial sector for the period of five years (2013–2017). Panel data was used to examine how the risk governance variables (Enterprise Risk Management_index, Chief Risk Officer_presence, Board Risk Committee_size, Board Risk Committee_activism, and Board Risk Committee_independence) affects financial performance (Return on Asset). The study reveals empirically that most of the risk governance variables (ERM_index, CRO_presence, BRC_activism, and BRC_independence) have a significant and positive impact on the performance of the firm with the exception of BRC_size which shows a negative association with the financial performance of the studied firms. The study empirically reveals that strong Chief Risk Officer (CRO) presence, effective board risk committee, and inclusion of independent directors in the risk committee will go far in serving as factors that would improve the performance of firms in today’s financial environment. This study made a lot of core findings that contribute to the emerging literatures on risk governance and risk management research.

The impact of political connection and risk committee on corporate financial performance: evidence from financial firms in Malaysia

Purpose This study aims to examine the association between the effectiveness of risk committee (RC) and firms’ performance in Malaysian context. It also explores whether political connection has an impact on the relationship. Design/methodology/approach This study, using a principle components analysis, derives a factor score for RC attributes to proxy the effectiveness of RC. It also uses both accounting and market performance to measure the company performance. Findings Using a sample of financial firms from 2004 to 2018, this study finds that both accounting and market performance are higher for firms with an effective RC. It also finds that the effectiveness of RC in monitoring and management of risks is more pronounced for politically connected firms (PCFs). In further tests, the paper finds that RC attributes (i.e. RC independence, qualification and gender) are positively and significantly associated with accounting performance, while those of RC existence and overlap are positively and significantly related to market performance. The study also finds that RC size (RC diligence) has a positive (negative) impact on financial firms accounting and market performance. The further analysis also shows that PCFs with a separate as well as larger RCs experience both higher accounting and market performance. This study’s results are robust for concerns of endogeneity. Practical implications The findings of this study resolve the ongoing debates surrounding political connection by suggesting financial firms not to have politically connected board members as doing so may deteriorate their performance. This study’s results are also useful for investors, regulators and policymakers. Originality/value To the best of the authors’ knowledge, this study, for the first time, introduces on the interaction term between the effectiveness of RCs and political connection to empirically explore how an effective RC may reduce the potential risk of political ties. As such, this study adds to the literature and sheds light on an aspect of risk (i.e. risk stems from establishing close link with the government) that is growing in importance.