The Determinants of Audit Committee Independence and Activity: Evidence from the UK

Abstract

We investigate the determinants of audit committee independence and activity in UK firms. We employ panel data analysis for non‐financial films that provide the required information for the period from 2003 to 2008. Our findings show that audit committees are more independent when firms have large boards and more insider ownership. In addition, we detect that large firms place less demand on audit independence. This study also provides new evidence that firms with more free cash flows require more audit independence. Finally, firms with large audit committees and large boards that meet more frequently are active and demand more audit committee meetings.

Keywords: Agency theory, audit committee, corporate governance