Research Article 27
Journal of Finance & Economics Research - Volume 9, Issue 2 2024
By Muhammad Naeem,Abdul Rehman, Sumair Farooq
10.20547/jfer2409203
Keywords: Risk Management Committee, Firm Size, Financial Distress, Pakistan.

The purpose of this study is to empirically examine how risk management committees, taking into account variables like size, independence, and frequency of meetings, affect the possibility of financial distress in Pakistan, an emerging market. Furthermore, it aims to determine whether firm size moderates the relationship between risk management committees and financial distress. The fixed-effects panel regression approach is used in the examination of a sample of 944 firm-year observations from 2015 to 2022. The Hausman test is used to validate the fixed-effect model's applicability after panel data analysis techniques are executed. The main conclusions of the study make available insightful information on the Pakistani context. In certain, it validates that reducing financial distress is certainly and significantly impacted by the risk management committee's size. Financial problems are less expected to occur in larger committees. The study also shows that the relationship between committee independence and financial distress is moderated by firm size. According to the researcher's knowledge this is the pioneer study, that checks the impact of risk management committees on financial distress and also the moderating role of firm size in Pakistan. These new results suggest that firms with different-sized risk management committees can draw in investors by reducing asymmetric information, which would eventually reduce the probability of financial distress. However, risk management committees and firm size are significant factors in lowering the probability of financial distress.

Submission Date: 8 Mar, 2024 Reviews Completed: 27 May, 2024
Acceptance Date: 31 May, 2024 Publication Date: 7 Jun, 2024