Stand-alone Risk Research Articles

Board structures and the establishment of a risk management committee by Malaysian listed firms

The purpose of this study is to examine the association between the establishment of a risk management committee and board structures of Malaysian listed firms. The study predicts that more independent, expert, and diligent boards are likely to establish a stand-alone risk management committee. It employs a cross-sectional analysis of 690 firms listed on the Bursa Malaysia for the financial year ending in 2003. Multiple regression analysis is used to estimate the relationships proposed in the hypotheses. The study finds a strong support for an association between the establishment of a risk management committee and strong board structures. Specifically, the result shows that firms with higher proportions of non-executive directors on boards and firms that separate the positions of chief executive officers and board chairs are likely to set up a stand-alone risk management committee. Firms with greater board expertise and board diligence are also likely to establish a risk management committee. These findings suggest that stronger boards demonstrate their commitment to and awareness of improved internal control environment. Finally, the study also documents a positive and significant association between firm size, complexity of a firm’s operations, and the use of Big Four audit firms with the establishment of a risk management committee.

Human Papillomavirus Detection by Hybrid Capture II and Residual or Recurrent High-Grade Squamous Cervical Intraepithelial Neoplasia after Large Loop Excision of the Transformation Zone (LLETZ)

The purpose of this study was to assess the association between highly-oncogenic types HPV DNA detection by Hybrid Capture II (HCII) and residual or recurrent high-grade cervical intraepithelial neoplasia (CIN 2 or 3) during the follow-up of women submitted to large loop excision of the transformation zone (LLETZ). In this cohort study, 94 women submitted to LLETZ because of CIN 2 or 3 between March 2001 and September 2002 were followed up twice yearly until September 2003. Follow-up visits consisted of an interview regarding clinical, social and demographic characteristics complemented with gynecological examination with specimen collection for Pap test and HCII and colposcopy. Eighty-one patients attended the first visit (mean 4.8 months, range 3-6) and 75 the second visit (mean 10.9 months, range 7-17 months). McNemar's test to assess the variation of HPV DNA detection following LLETZ, odds ratios (OR) to evaluate the correlation between HPV DNA positivity and residual/recurrent CIN during follow-up, and logistic regression to assess the risk of residual/recurrent CIN were used. There was a strong and significant reduction in HPV detection after LLETZ (P < 0.001). HPV DNA detection was correlated with residual/recurrent CIN at the first (OR = 103.4; 95% CI 5.5 to 1961.2) and second (OR = 12.7; 95% CI 1.1 to 345.5) follow-up visits. Multivariate analysis showed HPV persistence as a stand-alone risk factor for residual/recurrent CIN (OR = 50.3; 95% CI 3.8 to 663.1). High risk HPV DNA detection decreased substantially after CIN treatment with LLETZ, but HPV persistence was strongly correlated with residual/recurrent CIN.

Testing for Market Discipline in the European Banking Industry: Evidence from Subordinated Debt Issues

The question of whether private investors can discriminate between the risk taken by banks is empirically investigated by testing the risk sensitivity of European banks' subordinated notes and debentures (SND) spreads. A unique dataset of spreads, ratings, and accounting measures of bank risk is used for a sample of SND issued during the 1991-2000:Q1 period. Moody's Bank Financial Strength (MBFS) and FitchIBCA Individual (FII) ratings, which omit the influence of government and other external support on risk borne by investors, are used as bank risk proxies together with accounting variables to explain the variability of spreads. Empirical results support the hypothesis that SND investors are sensitive to bank risk, with the exception of SND issued by public sector banks, i.e., government owned or guaranteed institutions. Results also show that the sensitivity of SND spreads to measures of stand-alone risk (i.e., measures that do not incorporate external guarantees) has been increasing from the first to the second part of the 1990s, with the perception of too-big-to-fail type guarantees by private investors gradually disappearing. This result can be attributed to the joint effect of the loss of monetary policy by national central banks and the public budget constraints imposed by the European Monetary Union (EMU).

Testing for Market Discipline in the European Banking Industry: Evidence from Subordinated Debt Issues

The question of whether private investors can discriminate between the risk taken by banks is empirically investigated by testing the risk sensitivity of European banks' subordinated notes and debentures (SND) spreads. A unique dataset of spreads, ratings, and accounting measures of bank risk is used for a sample of SND issued during the 1991-2000:Q1 period. Moody's Bank Financial Strength (MBFS) and FitchIBCA Individual (FII) ratings, which omit the influence of government and other external support on risk borne by investors, are used as bank risk proxies together with accounting variables to explain the variability of spreads. Empirical results support the hypothesis that SND investors are sensitive to bank risk, with the exception of SND issued by public sector banks, i.e., government owned or guaranteed institutions. Results also show that the sensitivity of SND spreads to measures of stand-alone risk (i.e., measures that do not incorporate external guarantees) has been increasing from the first to the second part of the 1990s, with the perception of too-big-to-fail type guarantees by private investors gradually disappearing. This result can be attributed to the joint effect of the loss of monetary policy by national central banks and the public budget constraints imposed by the European Monetary Union (EMU).