Audit committee adoption and firm value: evidence from UK financial institutions

Abstract

Purpose: This study examines the impact of audit committee (AC) adoption on the financial value of financial institutions in the UK and also examines the impact of the establishment of an audit committee on firm value during the pre/post global financial crisis era. Design/methodology/approach: The paper embarks on a theoretical and empirical literature review on audit committee (AC) adoption and its impact on the firm's financial value. The paper uses data from 63 financial institutions and covers a 12-year period. Findings: The empirical results indicate that the adoption of an AC by financial institutions has a positive and statistically significant impact on firm value. The results from the precrisis period also indicate the adoption of an AC makes a positive and significant contribution to firm value. However, there is no impact on firm value during the post-crisis period. Our results suggest that the entire UK economy experienced an economic downturn after the financial crisis (2009)(2010)(2011) and financial firms were no exception. Research limitations/implications: Our study helps to fill research gaps on the relationships between ACs and firm value as they exist in UK financial institutions. These findings are important for policy-makers and regulators. Originality/value: To the best of our knowledge, this research is the first to conduct an empirical study of the effect of AC adoption on UK financial institutions and firm value. Second, no single study has been conducted on the effects of AC adoption and its impact on either the pre-or the post-financial crisis periods. This is the first paper to provide such empirical evidence.

Impact of Audit Committee structure on firms’ value in Pakistan: Evidence from the Cement Sector

“…The main motivational tenacity of the revision is to check the effect of AC structure on a company's financial performance. A different analysis is used by prior studies to check the effect of independent variables on dependent variables in term of simple LSL, multiple regression, fixed approach or random approach (Agyemang-Mintah & Schadewitz, 2018;Mousa & Saeed, 2017;Othman, Ishak, Arif, & Aris, 2014). On the basis of literature and according to data style the researcher first runs a houseman test to decide either regression analysis with the fixed approach is appropriate or with the random approach.…”

“…The four control variables are used in this study, the first one is GROWTH which shows the positive effect on Tobin's Q at the level of 5% it is insignificant but at the level of 10%, it is statistically significant (Agyemang-Mintah & Schadewitz, 2018;Sharma et al, 2009). The capital structure (LEV) is negative and insignificant with the company's performance.…”

“…The researcher uses person correlation in the study for checking the multicollinearity and no high correlation is found. See table 2 which show the multicollinearity absence in the study (Agyemang-Mintah & Schadewitz, 2018;Hair et al, 1998;Waresul Karim et al, 2013). For example, AC size positive and significantly correlated with (Tobin's Q) firms' value (Agyemang-Mintah & Schadewitz, 2018).…”

“…The researcher checks the impact of AC with three magnitudes: AC size, AC meeting frequency, and the percentage of the independent auditors in AC (Berkman & Zuta, 2017). And the financial performance of the companies is measured as Tobin's Q (Agyemang-Mintah, 2015;Agyemang-Mintah & Schadewitz, 2018;Berkman & Zuta, 2017;Black, Jang, & Kim, 2006).…”

Audit Committees and Bank Governance: the Case of Tunisian Banks

“…At the international level, the audit committee is strongly recognized as a key element in the corporate governance system (Dellaportas et al, 2012, Ghafran and O'Sullivan, 2013, Agyemang-Mintah and Schadewitz, 2018. In fact, the adoption and use of audit committees is the subject of numerous recommendations in the context of professional reports or regulatory commissions (Treadway, 1987, Cadbury, 1992, Blue Ribbon Committee (BRC), 1999, Sarbanes-Oxley (SOX), 2002.…”