Benchmarking Audit Committee Effectiveness in the UK
30 Pages Posted: 12 Jan 2001
Date Written: November 14, 2000
Abstract
This paper adopts the benchmarking approach to study audit committee effectiveness in the UK. Using FRRP sample spanning a decade from 1990 to 2000, this paper investigates factors leading to the violation of accounting and financial reporting standards by UK firms.
Our binary logit regression suggest the following results: First, smaller boards provide better incentive for monitoring; Second, consistent with previous studies, board and committee independence enhances reduce the likelihood of financial reporting problems; Third, contrary to popular suggestions, director share ownership might cause non-compliance with standards; Forth, outside directorships seem to enable non-executive directors to gain monitoring experience more quickly and is conductive to better financial reporting; Fifth, financial literacy and audit committee meeting frequency all reduce the probability of standard violations in financial reporting.
Keywords: Financial reporting, internal governance mechanism, Corporate governance, Logit regression
JEL Classification: M49, G34
Suggested Citation: Suggested Citation
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