Complying with best practice risk management committee guidance and performance

Abstract

This study examines the relationship between ‘best practice’ risk management committee and firm performance in an environment where the existence and composition of risk management committees are purely voluntary. Based on a sample of 368 Australian listed firms over 2007–2014, we find firms that voluntarily adopted the ‘best practice’ risk management committee perform better than other firms. In addition, our result shows that among the four ‘best practice’ risk management committee characteristics (independence of risk management committee chairman, independence of risk management committee members, risk management committee size and risk management committee human capital), risk management committee human capital plays important role in increasing firm performance.