The impact of audit committee effectiveness on firms’ outcomes in China: a systematic review

Abstract

Purpose This paper aims to discuss the academic literature on the impact of audit committee effectiveness on different outcomes (accounting, auditing, governance and economics) in China. Design/methodology/approach The authors have conducted a systematic review using the PRISMA guidelines. Findings The key finding is that the regulatory organisations in China, such as the China Securities Regulatory Commission (CSRC) and the State-Owned Assets Supervision and Administration Commission (SASAC), need to play the active role that is expected of them to enhance the transparency and independence of an audit committee. Also, Chinese listed companies are facing institutional barriers (CEO power, concentrated ownership and government influence) to effectively implement the imported concept within China. Research relating to the audit committee's effectiveness has focused mainly on agency and resource dependence perspectives. Research limitations/implications China’s regulatory bodies (CSRC and SASAC) should make necessary reforms to enhance the audit committee’s effectiveness. This study also provides implications for the other settings that have imported the audit committee concept from the Anglo-American countries. Originality/value This study contributes to the literature by synthesising the prior mixed findings on audit committee literature in China and providing suggestions to the regulators and future research.

Firm governance structures, earnings management, and carbon emission disclosures in Chinese high‐polluting firms

“…These findings statistically support Hypothesis 2. This study acceded with the agency theory and with prior research that effective firm governance attributes is associated with better monitoring and significantly constrain earnings manipulation practices and transparent carbon disclosures (Al‐Haddad & Whittington, 2019; Bilal et al, 2018; El Diri et al, 2020; Ezeani et al, 2021; Gerged, Albitar, et al, 2021; Goud, 2022; Komal et al, 2021; Komal, Bilal, Chengang, et al, 2022; Usman, Salem, et al, 2022).…”

“…Our study contributes to the literature by documentation the positive role of large and independent directors in promoting carbon disclosures. These findings indicate that regulators who removed obstacles such as political interference of management and weaken for independent directors effectively enable a firm to fulfill the needs of its stakeholders by enabling monitoring financial reporting quality (Komal, Bilal, Chengang, et al, 2022; Komal et al, 2021). On the other hand, CEO duality and directors' shareholding are inversely related to carbon disclosures.…”

“…These findings indicate that CEOs with board chairmanship and directors with ownership concentration cannot reduce the information asymmetry among the stakeholders and are associated with lower disclosures about carbon emissions and less transparent financial reporting quality (Barako et al, 2006; Ho & Wong, 2001). Weak firm governance and compliance with environmental regulations due to the prevalence of more state‐owned firms is likely a contributing factor for the lower level of carbon disclosures and earnings management in China (Bilal et al, 2022; Komal et al, 2021; Komal, Bilal, Chengang, et al, 2022; Qian & Chen, 2021; Shi et al, 2021).…”

“…Next, the moderating impact of earnings management on the relationships between firm governance structures and carbon disclosures are reported in columns 2-6 of Table 3. El Diri et al, 2020;Ezeani et al, 2021;Gerged, Albitar, et al, 2021;Goud, 2022;Komal et al, 2021;Komal, Bilal, Chengang, et al, 2022;.…”

“…In contrast, using a wealth maximization approach, researcher using this perspective followed stakeholder and legitimacy theories, which claimed that firms which are not engaged in earnings manipulations are associated with strong monitoring of governance structures y (Bilal et al, 2018; Ezeani et al, 2021; Komal, Bilal, Chengang, et al, 2022; Usman, Ezeani, et al, 2022; Usman, Salem, et al, 2022), and provided more transparent information about carbon disclosures (Bilal et al, 2022; Choi et al, 2013; Lemma et al, 2020). The prior literature considered corporate governance as a moderating factor, while inferring from the stakeholder and legitimacy theories, the current study aims to contribute to the literature by examining the moderating impact of earnings management on the relationship between firm governance structures and carbon emission discourses.…”