Audit committee characteristics, enterprise risk management and stock price synchronicity

Abstract

Purpose This study aims to examine the impact of audit committee (AC) characteristics and enterprise risk management (ERM) on stock price synchronicity (SYNCH). Design/methodology/approach Based on a sample of 437 US-based firms over the period 2010 to 2017, the current study uses fixed-effect and ordinary least square to test the formulated hypotheses. Majority of the sample firms are based on the S&P 500 index. This study also performs a battery of robustness checks. Findings The authors find that overall female members and female financial experts and female chairpersons of the AC are negatively associated with SYNCH. Similarly, the study endorses the monitoring role of financial experts and the diligence of the AC (threshold of four annual meetings), as both are negatively associated with SYNCH. However, the authors find that the AC chaired by the financial expert is also negative but insignificantly associated with SYNCH. Finally, the study finds that ERM is also negatively linked with SYNCH. Practical implications The findings of the current study offer some important policy implications. For instance, the shareholders can benefit from the monitoring abilities of women and financial experts by increasing their ratio in the AC. The study also offers some useful insights regarding the financial experts and chair of the AC and ERM. Originality/value The current study examines the association of AC characteristics with SYNCH, while the prior literature only assesses the impact of various board characteristics (such as size, independence and gender diversity). The study also contributes to the literature of ERM by providing new insights on the influence of the presence of ERM framework/program on SYNCH.

Corporate social responsibility commitment of women directors through audit committees: evidence from international firms

“…Women directors tend to be more oriented toward social and environmental issues, more open-minded, more conciliatory, more convincing and more interested in non-financial than financial information and they value integrity and ethical behavior. In other words, past and recent research shows that leadership and managerial style and behavior of women directors differ from those of their male colleagues (Abbasi et al ., 2020; Ghafoor et al ., 2022; Ud Din et al ., 2021). Female directors on boards seem to persuade executive and independent directors on audit committees to disclose more CSR information, consistent with the results that Reguera-Alvarado and Bravo-Urquiza (2022).…”

“…The second independent variable is the presence of independent directors on audit committees, represented by AUDCOM_INDEP_DIR. In line with prior research (Appuhami and Tashakor, 2017;Ghafoor et al, 2022), this proxy was calculated as the ratio of the total number of independent directors on audit committees to the total number of directors on audit committees. The third independent variable is the attendance at audit committees' meetings by directors AUDCOM_MEET_ATTEN was calculated as the average overall attendance percentage of audit committee meetings from company reports.…”

“…In line with prior research (Appuhami and Tashakor, 2017; Ghafoor et al., 2022), this proxy was calculated as the ratio of the total number of independent directors on audit committees to the total number of directors on audit committees. The third independent variable is the attendance at audit committees' meetings by directors (AUDCOM_MEET_ATTEN), the variable used by such authors as Ghafoor et al. (2022).…”

“…In this regard, Byrnes et al (1999) and Man and Wong (2013) show that female directors tend to take less risk and are more conservative than men. Recent empirical literature (Abbasi et al, 2020;Ghafoor et al, 2022;Ud Din et al, 2021) shows the behavioral, ethical, managerial and leadership style of women directors differs from their homologous colleagues and counterparts.…”

“…Recent empirical literature (Abbasi et al. , 2020; Ghafoor et al. , 2022; Ud Din et al., 2021) shows the behavioral, ethical, managerial and leadership style of women directors differs from their homologous colleagues and counterparts.…”