Faculty of Economics and Business
Universiti Kebangsaaan Malaysia
This Study explores the association between audit committee characteristics and the establishment of a risk management committee by Malaysian listed firms. The study predicts that firms with more independent, expert and diligent audit committees are likely to establish a stand-alone risk management committee. It is also expected that audit committees with more members are also likely to support the establishment of a risk management committee. The study employs a cross-sectional analysis of 690 firms listed on the Bursa Malaysia for the financial year ending in 2003. A logistic regression analysis is used to estimate the relationships proposed in the hypotheses. The study finds a strong support for associations between the establishments of risk management committee and audit committee size, and audit committee diligence. The results also show that the establishment of a risk management committee is positively and significantly associated with firm-specific variables such as firm size, complexity of a firm’s operations and the use of Big Four audit firms.