Effect of Risk Management Committee on Monitoring Mechanisms

Abstract

Corruption has become an identification label for many African countries of which Nigeria is one of the top listed countries. Monitoring mechanisms (MM) is therefore at the forefront of issues being considered by governments, company boards of directors, regulators, and management to ensure transparency, accountability, and protection of the shareholders' interests. Risk management is connected with components of internal control (risks assessment, monitoring, and control activities) which is a vital instrument to mitigate agency problems emanating from corruption and moral hazards in companies. It is, therefore, essential to understand Risk Management Committee (RMC) as one of the organisational attributes that can affect MM. The relationship between RMC and MM has not been empirically tested, particularly in Sub-Saharan Africa. Therefore, this paper examines the relationship between RMC and monitoring mechanisms. It provides empirical supports that RMC associates with monitoring mechanisms to reduce agency problems, using the data (2010-2012) of Nigerian non-financial listed companies. The board of directors of Nigerian companies is encouraged by this research to explore the usefulness of RMC in monitoring the management and controlling shareholders to lessen agency problems and protect the interests of the minority shareholders.