Why Do Bank Boards Have Risk Committees?
René M. Stulz, James Tompkins, Rohan Williamson, and Zhonxia (Shelly) Ye
Coles Working Paper Series FALL21-03, November 2021
Overview We develop a theory of bank board risk committees that explains why such committees can be valuable to shareholders even when they do not reduce bank risk. As predicted by our theory (1) many large and complex banks voluntarily chose to have a risk committee before the Dodd-Frank Act (DFA) forced bank holding companies with assets in excess of $10 billion to have a board risk committee, and (2) establishing a board risk committee does not reduce a bank’s risk on average. Using unique interview data, we show that the work of risk committees is consistent with our theory.
40 | Working Papers
Made with FlippingBook - Online catalogs