Audit committee and factors that affect its characteristics: the case of Greece
- PDF / 705,987 Bytes
- 14 Pages / 595.276 x 790.866 pts Page_size
- 5 Downloads / 230 Views
ORIGINAL ARTICLE
Audit committee and factors that affect its characteristics: the case of Greece George Drogalas1 · Michail Nerantzidis2 · Margaritis Samaras3 · Michail Pazarskis4 Received: 12 August 2019 © Springer Nature Limited 2020
Abstract Policy-makers currently place great emphasis on strengthening the audit committees’ structure. Underlying this is a belief that strengthening the audit committees’ structure may enhance the effectiveness as well as the quality of financial information. In this research, we examine the relationship between audit committee characteristics (number of AC members, percentage of independent audit committee members and percentage of board directors) and structure, accounting and corporate governance-related measures. Using a sample of 126 listed companies on the Athens Stock Exchange, we show that audit committee size has a positive relationship with the number of the firm’s employees and negative relationship with operating cash flows and the presence of an executive chairman. Moreover, we find that audit committee effectiveness has a positive relationship with the percentage of independent directors. On that basis, our findings are important since they highlight the usefulness of audit committees and offers insights to academics, practitioners and policy-makers. Keywords Corporate governance · Internal audit · Athens stock exchange
Introduction According to Denis and McConnell (2003), corporate governance (hereafter: CG) is the set of mechanisms that induce the self-interested controllers of a company to make decisions that maximize the value of the company to its owners. In other words, it is the link that governs the relationship between management, board of directors, shareholders and any other interested party (for more, see Nerantzidis et al. 2012). On that basis, audit committees (hereafter: AC) as a mechanism of monitoring and assessing financial statements play a crucial role on the reduction of the information asymmetry problem between executive managers and independent directors on the board (Ismael and Roberts 2018; * Michail Nerantzidis [email protected] 1
School of Business Administration, University of Macedonia, Thessaloníki, Greece
2
School of Economics and Business, University of Thessaly, Larissa, Greece
3
School of Information Sciences, University of Macedonia, Thessaloníki, Greece
4
School of Economics and Business Administration, International Hellenic University, Thessaloníki, Greece
Pandit et al. 2017; Fichtner 2010). Thus, we may say that the presence and the effectiveness of the AC may increase the firm’s value (Agyemang-Mintah and Schadewitz 2018). Although there are many studies around the world investigating the AC’s characteristics and/or effectiveness; from Asia (e.g., Alhajri 2017; Othman et al. 2014; Rahmat et al. 2009), to America (Defond et al. 2005; Farber 2005), Europe (Ismael and Roberts 2018; Li et al. 2012) and Africa (Sellami and Fendri 2017), no study has been examined in Greece. A key component of current gover
Data Loading...
