Risk Management Committees’ Characteristics and the Financial Performance of Deposit Money Banks (Dmbs) in Nigeria

Authors

  • Wasiu Adebayo Lamidi Osun State University
  • Aderemi Olalere Adebayo Osun State University, Osogbo
  • Titilope Esther Olorede Osun State University
  • Mukaila Oyesegun Oyekanmi Osun State University

Keywords:

financial performance; risk management committee; deposit money banks

Abstract

This paper examines the characteristics of risk committees as well as their effects on the financial performance of deposit money banks (DMBs) in Nigeria. The study made use of secondary data gathered from the bank's annual reports, and 13 deposit money banks were chosen as a sample using the purposive sample technique. The data was analysed using the panel regression approach. Using a fixed effect model, the study discovered that the size and independence of risk management committees have a negative impact on the financial performance of deposit money banks in Nigeria, while the size of the committees is insignificant. Gender diversity and meetings have been shown to have a positive impact on the financial performance of DMBs in Nigeria. This study suggested that more women be included on the risk management committee, as well as that more frequent meeting be held to facilitate this participation.

Author Biographies

Wasiu Adebayo Lamidi, Osun State University

Lecturer

Titilope Esther Olorede, Osun State University

Lecturer

Mukaila Oyesegun Oyekanmi, Osun State University

Director of Internal Audit

References

Abdul Rahman, R., & Mohamed Ali, F. H. (2006). Board, audit committee, culture and earnings management: Malaysian evidence. Managerial Auditing Journal, 21(7), 783-804.

Abdul Rahman, R., & Salim, M. R. (2010). Corporate governance in Malaysia: Theory, law and context. Rawang, Selangor, Malaysia.

Abubakar, A. H., Ado, A. B., Mohamed, M. I., & Mustapha, U. A. (2018). The effect of risk management committee attributes and board financial knowledge on the financial performance of listed banks in Nigeria. American International Journal of Business Management, 1(2), 07-13.

Aebi, V., Sabato, G., & Schmid, M. (2012). Risk management, corporate governance, and bank performance in the financial crisis. Journal of Banking & Finance, 36(12), 3213-3226.

Akhtar, A., Bakhsh, A., Ali, M., & Kousar, S. (2019). Impact of capital structure on the performance of textile sector in Pakistan: Examining the moderating effect of liquidity. Journal of Accounting and Finance in Emerging Economies, 5(1), 1-12.

Arfken, D. E., Bellar, S. L. & Helms, M. M. (2004). The ultimate glass ceiling revisited: The presence of women on corporate boards. Journal of Business ethics, 50(2), 177-186.

Ashbaugh‐Skaife, H., Collins, D. W., Kinney Jr, W. R. & LaFond, R. (2009). The effect of SOX internal control deficiencies on firm risk and cost of equity. Journal of Accounting research, 47(1), 1-43.

Ayodele, T. D., & Alabi, R. O. (2014). Risk management in Nigerian banking industry. Research Journal of Finance and Accounting, 5(2), 131-136.

Beasley, M. S., Carcello, J. V., Hermanson, D. R., & Lapides, P. D. (2000). Fraudulent financial reporting: Consideration of industry traits and corporate governance mechanisms. Accounting Horizons, 14(4), 441- 454.

Bédard, J., Chtourou, S. M., & Courteau, L. (2004). The effect of audit committee expertise, independence, and activity on aggressive earnings management. Auditing: A Journal of Practice & Theory, 23(2), 13-35.

Central Bank of Nigeria [CBN] (2014). Code of corporate governance for banks and discount houses in Nigeria and guidelines for whistle blowing in the Nigerian Banking Industry.

Chukwunulu, J. I., Ezeabasili, V. N., & Igbodika, M. N. (2019). Risk management and the performance of commercial banks in Nigeria (1994-2016). IIARD International Journal of Banking and Finance Research, 5(1), 64-71.

Edogbanya, A., & Kamardin, H. (2015). The relationship between audit and risk management committees on financial performance of non-financial companies in Nigeria: A conceptual review. Mediterranean Journal of Social Sciences, 6(3), 206.

Elamer, A. A., & Benyazid, I. (2018). The impact of risk committee on financial performance of UK financial institutions. International Journal of Accounting and Finance, 8(2), 161-180.

Ellul, A., & Yerramilli, V. (2011). Stronger risk, lower controls: evidence from US bank holding companies. National Bureau of Economic Research, Working Paper 16178. Retrieved from https://scholar.google.co.uk/scholar?q=El lul+and+Y erramilli+%282010%29&btnG =&hl=en&as.

Erkens, D. H., Hung, M., & Matos, P. (2012). Corporate governance in the 2007–2008 financial crisis: Evidence from financial institutions worldwide. Journal of Corporate Finance, 18(2), 389-411.

Fali, I. M., Philomena, O. N., Ibrahim, Y., & Amos, J. (2020). Risk management committee size, independence, expertise and financial performance of listed insurance firms in Nigeria. International Journal of Research and Innovation in Social Science (IJRISS), IV(V), 313 – 319.

Fama, E. F., & Jensen, M. C. (1983). Separation of ownership and control. The Journal of Law and Economics, 26(2), 301-325.

Fondas, N., & Sassalos, S. (2000). A different voice in the boardroom: How the presence of women directors affects board influence over management. Global Focus, 12(2), 13-22.

Halim, E. H., Mustika, G., Sari, R. N., Anugerah, R., & Mohd-Sanusi, Z. (2017). Corporate governance practices and financial performance: The mediating effect of risk management committee at manufacturing firms. Journal of International Studies, 10(4), 272-289. doi:10.14254/2071-8330.2017/10-4/21

Harrison, P. D., & Harrell, A. (1993). Impact of “adverse selection” on managers' project evaluation decisions. Academy of Management Journal, 36(3), 635-643.

Hassan, M. K. (2008). The corporate governance inertia: the role of management accounting and costing systems in a transitional public health organization. In Corporate Governance in Less Developed and Emerging Economies. Emerald Group Publishing Limited.

Huang, J. & Kisgen, D.J. (2013). Gender and corporate finance: are male executives overconfident relative to female executives? Journal of Financial Economics, 108(3), 822-839.

Hutchinson, M., Mack, J. & Plastow, K. (2015). Who selects the ‘right’ directors? An examination of the association between board selection, gender diversity and outcomes. Accounting and Finance, 55(4), 1071-1103.

Ibrahim, M. F., Okika, N. P., Yunusa, I. & Janada, A. (2020). Risk management committee size, independence, expertise and financial performance of listed insurance firms in Nigeria. International Journal of Research and Innovation in Social Science (IJRISS), IV(V).

Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of financial economics, 3(4), 305-360.

Jia, J. (2019). Does risk management committee gender diversity matter? A financial distress perspective. Managerial Auditing Journal, 34(8), 1050 - 1072

Jiraporn, P., Singh, M., & Lee, C. I. (2009). Ineffective corporate governance: Director busyness and board committee memberships. Journal of Banking & Finance, 33(5), 819-828.

Kallamu, B. S., Saat, N. A. M., & Senik, R. (2013). Corporate strategy and firm performance in finance industry: the moderating role risk management committee. Management, 2(11), 143-153.

Kakanda, M. M, Salim, B., & Chandren, S. (2018). Risk management committee characteristics and market performance: Empirical evidence from listed financial service firms in Nigeria. International Journal of Management and Applied Science, 4(2), 6-10.

Khlif, H. & Achek, I. (2017). Gender in accounting research: a review. Managerial Auditing Journal, 32(6), 627-655.

Nguyen, T., Locke, S., & Reddy, K. (2014). A dynamic estimation of governance structures and financial performance for Singaporean companies. Economic Modelling, 40 (C), 1–11.

Owojori, A. A., Akintoye, I. R., & Adidu, F. A. (2011). The challenge of risk management in Nigerian banks in the post consolidation era. Journal of Accounting and Taxation, 3(2), 23-31.

Protiviti (2011). Should the board have a separate risk committee? Board perspectives: Risk Oversight. Available at: http://www.protiviti.com/ja-JP/Downloads/RiskOversight_vol24_E.pdf

Quadri, H. A. (2010). Conceptual framework for corporate governance in Nigeria–Challenges and panaceas. PM World Today, 12(9), 1-8.

Raghunandan, K., & Rama, D. V. (2007). Determinants of audit committee diligence. Accounting Horizons, 21(3), 265–279.

Sori, Z. M., Ramadili, S. M., & Karbhari, Y. (2009). Audit committee and auditor independence: the bankers’ perception. International Journal of Economics and Management, 3(2), 317-331.

Subramaniam, N., Mcmanus, L., & Zhang, J. (2009). Corporate governance, firm characteristics and risk management committee formation in Australian companies. Managerial Auditing Journal, 24(4), 316-339.

Sudin, H. (2004). Determinants of Islamic bank profitability. The Global Journal of Finance and Economics, 1(1), 11-33.

Sufi, F. A. & Qaisar, A. M. (2015). Credit risk management and loan performance: Empirical investigation of micro finance banks of Pakistan. International Journal of Economics and Financial Issues, 574-579.

Tosi Jr, H. L., & Gomez-Mejia, L. R. (1989). The decoupling of CEO pay and performance: An agency theory perspective. Administrative Science Quarterly, 169-189.

Yatim, P. (2010). Board structures and the establishment of a risk management committee by Malaysian listed firms. Journal of Management & Governance, 14(1), 17-36.

Zemzem, A., & Kacemb, O. (2014). Risk management, board characteristics and performance in the Tunisian lending institutions. International Journal of Finance & Banking Studies, 3(1), 186.

Downloads

Published

2022-05-01

Issue

Section

Articles