4th Sriwijaya Economics, Accounting, and Business Conference 2018 (SEABC 2018)

5 / 2018-08-18 21:57:19

The Effect of Characteristics and Overlap Membership of Risk Oversight Committee on Banking Credit Risk in Indonesia

Corporate Governance,Banking Industry,Credit Risk

This research aims to provide empirical evidence regarding the effects of characteristics and overlap membership of Risk Oversight Committee on Banking credit risk in Indonesia. Both of committees are committee under Board of Commissioners that responsible for monitoring credit risk. Characteristics of each committees are measured by activities, size, and expertise & competence based on Hermawan (2009) and Indonesia Financial Service Authority (FSA) regulation. Samples are consisted of banks listed in Indonesia Stock Exchange (IDX) during 2013-2017. The result from this research concludes that expertise and competence of risk oversight committee has negative effect on bank credit risk. While, activities and size of both risk oversight committee and audit committee do not have significant impact on bank credit risk. Further on additional test, it’s concluded that only non-accounting financial expertise has negative impact on bank credit risk, implying this expertise may enhance the understanding of risk exposure and increase monitoring effectiveness of risk oversight committee in monitoring credit risk. Besides, this research also provides empirical evidence that overlap membership of risk oversight on audit committee has positive effect on bank credit risk, thus diluted the to the committee’s focus on monitoring bank credit risk.