The Determinants of the Establishment of a Risk Management Committee : A Case of Banks Listed in Indonesian Stock Exchange

This research explores the establishment factors of Bank's Risk Management Committee. The factors are firm characteristics, bank risks and audit committee characteristics on Indonesian banking sector listed companies. Independent variables related to firm characteristics which used in this research are Total Assets, Subsidiary Company Ownership, Institutional Ownership and Big Name CPA firms. Audit Committee Size and Audit Committee Expertise are independent variables of Audit Committee characteristics. Bank risks used as proxies are Capital Adequacy Ratio, Loan to Deposit Ratio, Non Performing Loan and Net Interest Margin. This research employs banks listed in Indonesian Stock Exchange in 2004-2006. A logistic regression analysis is used to predict the relationship proposed in the hypotheses for the establishment of risk management committee and independent variables. The results show that Assets, Ownership, AC Size and NPL are significant factors of establishment of a risk management committee at 10 % significant level