Abstract
Motivated by the requirement under the Dodd-Frank Act that all large bank holding companies create a stand-alone, board-level risk committee, this paper investigates the association between such a committee and regulatory risk both before and during the financial crisis. I focus the analysis on the set of banks that did not have a risk committee in place prior to the Dodd-Frank Act, as these are the banks that were most affected by the regulation. I find that matched control banks with a risk committee in place had higher capital ratios during the financial crisis, but lower capital ratios during more stable economic conditions relative to the banks without a risk committee. This paper contributes to the literature by narrowly investigating the effects a board-level risk committee, by focusing on a risk measure that is of interest to the regulators who implemented the new regulation, and by documenting that this association changes over time which highlights the importance of estimating the effects of new regulations across different economic conditions.
Original language | English (US) |
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Article number | 106709 |
Journal | Journal of Accounting and Public Policy |
Volume | 39 |
Issue number | 5 |
DOIs | |
State | Published - Sep 1 2020 |
Bibliographical note
Publisher Copyright:© 2019 Elsevier Inc.
Keywords
- Average treatment effect on the untreated
- Board of directors
- Risk committee