Substance Over Form? An Exploratory Study of the Role of Audit Committees in an Emerging Economy

36 Pages Posted: 2 Jun 2011

Date Written: June 1, 2011

Abstract

The existing body of literature on audit committees focuses on the effectiveness of audit committees in the outsider model of corporate governance. This research investigation examines audit committees in a setting representing the insider model of corporate governance in a transition economy, specifically raising questions about the resources and processes of audit committees. This study provides empirical support for the neo-institutional perspective on corporate governance, where audit committees are primarily formed to provide symbolic legitimacy, not vigilant monitoring. In the insider model of corporate governance the audit committee, as a monitoring device, assumes a less important role, as the large owners can directly oversee the financial aspects of the company. The audit committees have limited resources to perform their responsibilities, so the oversight processes are taking on a less formal format. The audit committee, in this setting, seems to play a more ceremonial role and focuses more on form than substance.

This study offers insights to policy makers interested in enhancing the regulation in the insider model of corporate governance. Additionally, the study provides insights into the practices of audit committees in a transition economy.

Keywords: corporate governance, audit committee, insider model

JEL Classification: M19, M41, M42

Suggested Citation

Dobija, Dorota, Substance Over Form? An Exploratory Study of the Role of Audit Committees in an Emerging Economy (June 1, 2011). Available at SSRN: https://ssrn.com/abstract=1856469 or http://dx.doi.org/10.2139/ssrn.1856469

Dorota Dobija (Contact Author)

Kozminski University ( email )

ul. Jagiellonska 57/59
Warsaw, 03-303
Poland

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