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Corporate Governance and Equity Prices: The Effect of Board of Directors and Audit Committee Independence

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  • Taher Hamza

    (LAMIDED - Institut Supérieur de Gestion Sousse)

  • Nada Mselmi

    (LAMIDED - Institut Supérieur de Gestion Sousse)

Abstract

This paper investigates the effect of board and audit committee independence on firm market performance. Using a sample of French listed firms, we find a negative and significant relation between board independence and equity returns. This suggests that appointing more independent directors fails in enhancing firm stock returns. Furthermore, we show that firms with independent audit committees exhibit higher equity returns. We analyze three portfolios sorted by the percentage of independent directors on boards and audit committees using Carhart's model and find that the portfolio of firms with low board independence and high audit committee independence exhibits the highest abnormal returns. JEL Classification: G34, G11

Suggested Citation

  • Taher Hamza & Nada Mselmi, 2017. "Corporate Governance and Equity Prices: The Effect of Board of Directors and Audit Committee Independence," Post-Print hal-03380724, HAL.
    • Handle: RePEc:hal:journl:hal-03380724
    DOI: 10.7202/1052694ar
    Note: View the original document on HAL open archive server: https://hal.science/hal-03380724
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    2. Erol Muzir & Cevdet Kizil & Burak Ceylan, 2021. "Role of International Trade Competitive Advantage and Corporate Governance Quality in Predicting Equity Returns: Static and Conditional Model Proposals for an Emerging Market," JRFM, MDPI, vol. 14(3), pages 1-31, March.

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    More about this item

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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