The Impact of Audit Committee Characteristics on Operational Risk: A Study among Banks in the Gulf Cooperation Council (GCC) countries in the Middle East over the period 2010-2019

The current research was conducted by analysing bank data over the period 2010-2019 and assessed the impact of the audit committee characteristics on operational risk among banks in the countries of the Gulf Cooperation Council (GCC) in the Middle East. It aimed to make a distinctive contribution to the practical and theoretical knowledge. Operational risk primarily refers to not achieving an organisation's objectives due to external factors, legal, people, technology, or procedures. The literature review identified six attributes that might have an impact banks' operational risk. Building on existing literature and the current research gap, a model related to the impact of audit committee characteristics (independent variables) on operational risk (dependent variable) was built. The model was rigorously tested using data from 42 banks from the GCC countries, and the data analysis of the sample was conducted using a statistical software package. This study, rather than relying on the personal opinions of groups or individuals in society, relied on empirical evidence to explain the extent to which the application of sound corporate governance and effective risk management could have an impact on the banking performance in managing operational risk, and, hence, the paradigm used for this research was quantitative. The overall results revealed that some characteristics of an audit committee, for example meeting frequency, members' independence, and members' ownership of shares, had an impact on operational risk among the banks' in the GCC countries. This indicates that the agency theory issues, influence the reduction of operational risk losses among banks because of the impact of the audit committee's characteristics, thus reducing agency costs. The novelty of this research is that it theoretically adds further knowledge regarding how the audit committee characteristics impact operational risk among banks’. Audit committee characteristics previously not analysed against the impact on operational risk among banks’ have been included. Practically, the results of this research will help central banks assess the requirements for audit committee governance processes and determine which corporate governance qualities are most effective in managing operational risk among banks’. The findings are helpful to a variety of practitioners, including investors, stock market participants, and corporate governance authorities, to evaluate how these oversight mechanisms, such as the audit committee, affect shareholders' perceptions of the banks' financial performance and could improve the decision-making processes of investors and stock market participants. Resultantly, investors will be better equipped to assess the dependability of financial statements.