Do the Attributes of Audit Committee Explain Non-Performing Loans? Evidence from an Emerging Economy

Abstract

This study examined whether various attributes of the audit committee of listed banks in Bangladesh explain the level of non-performing loans (NPLs). This study used a panel data set comprising all 30 listed banks with 250 bank-year observations for the period 2013–2017. It employed the random-effects GLS regression model with cluster robust standard error and AR (1) disturbance to examine the effect of several audit committee attributes on NPLs. We found that holding audit committee meetings frequently and a higher number of independent members in the audit committee facilitate to reduce NPLs. We, however, find no explicit evidence that the other attributes of the audit committee examined (audit committee size, financial experience and financial literacy of the audit committee members, professional qualifications of the audit committee Chairman) contribute in reducing NPLs. The findings will be useful for policymakers of the banking sector in Bangladesh and the relevant regulatory bodies in enabling them to understand the role of the various attributes of the audit committee in the incidence of NPLs. Keywords: attributes, audit committee, non-performing loans (NPLs), listed banks, Bangladesh

Effects of Corporate Governance Mechanisms on Climate Change Disclosures: Evidence from Listed Banks in an Emerging Economy

“…Consistent with the resource dependency theory, a large audit committee brings knowledge, diversified skills, wider experience and intellect to the board (Mollah et al, 2012). It is argued that using these qualities of a large audit committee and a high frequency of audit committee meetings can ensure good governance (Akter et al, 2021). Good governance of a firm reduces asymmetric information problems by disclosing information related to stakeholders’ interests, including climate change information.…”