IDEAS home Printed from https://ideas.repec.org/a/bla/corgov/v16y2008i1p16-31.html
   My bibliography  Save this article

Audit Committee and Firm Value: Evidence on Outside Top Executives as Expert‐Independent Directors

Author

Listed:
  • Kam C. Chan
  • Joanne Li

Abstract

Manuscript Type: Empirical Research Question/Issue: We examine the relation between independence of audit committee and firm value with a sample of Fortune 200 companies. Research Findings/Insights: Using a sample of Fortune 200 companies and defining top executives of other publicly traded firms as expert‐independent directors and controlling for firm specifics, board features, and individual director characteristics, we find the presence of expert‐independent directors on board and in the audit committee enhances firm value. Theoretical/Academic Implications: We provide empirical evidence to show that by focusing on this restricted definition of independent directors (expert‐independent directors), we are able to examine independence in both the board and audit committee in a different light. Practitioner/Policy Implications: We offer new insights to relate firm value of the composition of audit committee. When expert‐independent directors are of majority control of audit committee, finance‐trained directors improve firm value almost five times to that of firms with independent audit committee alone.

Suggested Citation

  • Kam C. Chan & Joanne Li, 2008. "Audit Committee and Firm Value: Evidence on Outside Top Executives as Expert‐Independent Directors," Corporate Governance: An International Review, Wiley Blackwell, vol. 16(1), pages 16-31, January.
    • Handle: RePEc:bla:corgov:v:16:y:2008:i:1:p:16-31
    DOI: 10.1111/j.1467-8683.2008.00662.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1467-8683.2008.00662.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1467-8683.2008.00662.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Mark L. Defond & Rebecca N. Hann & Xuesong Hu, 2005. "Does the Market Value Financial Expertise on Audit Committees of Boards of Directors?," Journal of Accounting Research, Wiley Blackwell, vol. 43(2), pages 153-193, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gary F. Peters & Andrea M. Romi & Juan Manuel Sanchez, 2019. "The Influence of Corporate Sustainability Officers on Performance," Journal of Business Ethics, Springer, vol. 159(4), pages 1065-1087, November.
    2. Sudip Datta & Mai Iskandar-Datta, 2014. "Upper-echelon executive human capital and compensation: Generalist vs specialist skills," Strategic Management Journal, Wiley Blackwell, vol. 35(12), pages 1853-1866, December.
    3. Adi Masli & Matthew G. Sherwood & Rajendra P. Srivastava, 2018. "Attributes and Structure of an Effective Board of Directors: A Theoretical Investigation," Abacus, Accounting Foundation, University of Sydney, vol. 54(4), pages 485-523, December.
    4. Kuang, Yu Flora & Qin, Bo, 2009. "Performance-vested stock options and interest alignment," The British Accounting Review, Elsevier, vol. 41(1), pages 46-61.
    5. Carlos Jiménez-Angueira & Nathan Stuart, 2015. "Relative performance evaluation, pay-for-luck, and double-dipping in CEO compensation," Review of Quantitative Finance and Accounting, Springer, vol. 44(4), pages 701-732, May.
    6. Mohammad Ziaul Hoque & MD. Rabiul Islam & Mohammad Nurul Azam, 2013. "Board Committee Meetings and Firm Financial Performance: An Investigation of Australian Companies," International Review of Finance, International Review of Finance Ltd., vol. 13(4), pages 503-528, December.
    7. Lanfeng Kao & Min-Hsien Chiang & Anlin Chen, 2024. "To mitigate the effect of underwriter bargaining power on IPO pricing through audit committee under an economy of little information asymmetry," Review of Quantitative Finance and Accounting, Springer, vol. 63(1), pages 147-167, July.
    8. Sandra Cavaco & Patricia Crifo & Antoine Rebérioux & Gwenael Roudaut, 2014. "Independent directors: less informed, but better selected? New evidence from a two-way director-firm fixed effect model," Working Papers hal-04141284, HAL.
    9. Lauren Cohen & Andrea Frazzini & Christopher J. Malloy, 2012. "Hiring Cheerleaders: Board Appointments of "Independent" Directors," Management Science, INFORMS, vol. 58(6), pages 1039-1058, June.
    10. Ghafran, Chaudhry & O'Sullivan, Noel, 2017. "The impact of audit committee expertise on audit quality: Evidence from UK audit fees," The British Accounting Review, Elsevier, vol. 49(6), pages 578-593.
    11. Wu, Chloe Yu-Hsuan & Hsu, Hwa-Hsien & Haslam, Jim, 2016. "Audit committees, non-audit services, and auditor reporting decisions prior to failure," The British Accounting Review, Elsevier, vol. 48(2), pages 240-256.
    12. Carol Liu, M.H. & Zhuang, Zili, 2011. "Management earnings forecasts and the quality of analysts’ forecasts: The moderating effect of audit committees," Journal of Contemporary Accounting and Economics, Elsevier, vol. 7(1), pages 31-45.
    13. Paul Tanyi & David B. Smith & Xiaoyan Cheng, 2021. "Does firm payout policy affect shareholders’ dissatisfaction with directors?," Review of Quantitative Finance and Accounting, Springer, vol. 57(1), pages 279-320, July.
    14. Berger, Allen N. & Kick, Thomas & Schaeck, Klaus, 2014. "Executive board composition and bank risk taking," Journal of Corporate Finance, Elsevier, vol. 28(C), pages 48-65.
    15. Randy Beavers & Shawn Mobbs, 2020. "Director overconfidence," Financial Management, Financial Management Association International, vol. 49(2), pages 389-422, June.
    16. Paul Anglin & Robert Edelstein & Yanmin Gao & Desmond Tsang, 2011. "How Does Corporate Governance Affect the Quality of Investor Information? The Curious Case of REITs," Journal of Real Estate Research, American Real Estate Society, vol. 33(1), pages 1-24.
    17. Sofia Larmou & Nikos Vafeas, 2010. "The relation between board size and firm performance in firms with a history of poor operating performance," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 14(1), pages 61-85, February.
    18. Chychyla, Roman & Leone, Andrew J. & Minutti-Meza, Miguel, 2019. "Complexity of financial reporting standards and accounting expertise," Journal of Accounting and Economics, Elsevier, vol. 67(1), pages 226-253.
    19. Badolato, Patrick G. & Donelson, Dain C. & Ege, Matthew, 2014. "Audit committee financial expertise and earnings management: The role of status," Journal of Accounting and Economics, Elsevier, vol. 58(2), pages 208-230.
    20. Huang, Qianqian & Jiang, Feng & Lie, Erik & Yang, Ke, 2014. "The role of investment banker directors in M&A," Journal of Financial Economics, Elsevier, vol. 112(2), pages 269-286.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:corgov:v:16:y:2008:i:1:p:16-31. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0964-8410&site=1 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.