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Risk Committees and Implied Cost of Equity Capital
Author(s) -
AlHadi Ahmed,
Hussain Syed Mujahid,
AlYahyaee Khamis Hamed,
AlJabri Hamdan Saif
Publication year - 2018
Publication title -
international review of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.489
H-Index - 18
eISSN - 1468-2443
pISSN - 1369-412X
DOI - 10.1111/irfi.12147
Subject(s) - equity capital markets , corporate governance , cost of capital , cost of equity , equity (law) , extant taxon , business , equity risk , accounting , capital adequacy ratio , equity capital , capital market , economic capital , finance , economics , private equity , human capital , political science , economic growth , evolutionary biology , law , biology , profit (economics) , microeconomics
We investigate the association between the existence of risk committee and implied cost of equity capital in a unique institutional setting where the formation of the board risk committee as part of the risk governance mechanism is not mandatory in the Gulf Cooperation Council (GCC) financial institutions. Using data from the six GCC countries, we find that implied cost of equity capital is negatively associated with the existence of board risk committee. These findings indicate that GCC financial firms with better risk governance practices at board level have lower implied cost of equity capital. We contribute to the extant literature on‐board risk governance in emerging market context.