Audit Committee Performance: Ownership vs. Independence – Did SOX Get it Wrong?

30 Pages Posted: 4 Mar 2014

See all articles by Brian J. Bolton

Brian J. Bolton

IMD Business School, Global Board Center

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Date Written: March 2014

Abstract

This study documents a positive relationship between audit committee stock ownership and firm performance in large US firms from 1998 to 2008. This study also finds a positive relationship between changes in ownership and performance. These results persist throughout the sample period, do not weaken after Sarbanes–Oxley and are robust to controlling for endogeneity between ownership and performance. After testing shows that there is no relationship between audit committee independence and firm performance, these findings suggest that audit committee stock ownership is an important corporate governance mechanism and potentially a more relevant variable than audit committee independence from a policy perspective.

Keywords: Corporate governance, Sarbanes–Oxley, Boards of directors, Audit committees

JEL Classification: G32, G34, G38, J41, M40

Suggested Citation

Bolton, Brian J., Audit Committee Performance: Ownership vs. Independence – Did SOX Get it Wrong? (March 2014). Accounting & Finance, Vol. 54, Issue 1, pp. 83-112, 2014. Available at SSRN: https://ssrn.com/abstract=2404099 or http://dx.doi.org/10.1111/j.1467-629X.2012.00504.x

Brian J. Bolton (Contact Author)

IMD Business School, Global Board Center ( email )

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