Audit Committee Financial Expertise and Information Asymmetry

2013 American Accounting Association Annual Meeting

49 Pages Posted: 22 Jul 2019

See all articles by Dina El Mahdy, Ph.D., CFE

Dina El Mahdy, Ph.D., CFE

Morgan State University

Jia Hao

Babson College

Yu Cong

Towson University

Date Written: March 1, 2019

Abstract

We examine the association between audit-committee expertise and asymmetric information in the U.S. equity market. Using precise private information extracted from a decomposed bid-ask spread, we find that the existence of an audit committee with financial expertise is negatively associated with information asymmetry. We further find CEO duality to mediate the association between audit-committee financial expertise and information asymmetry. More specifically, we document a significant positive association between the interaction term of CEO duality and audit-committee financial expertise and information asymmetry. Our results are robust to several market-microstructure measures of asymmetric information (e.g., quoted spread, effective spread, price impact, the probability of informed trading), firm-specific characteristics, and market-liquidity measures.

Keywords: audit-committee expertise, information asymmetry, spread, probability of informed trade, price impact

JEL Classification: M41, G3

Suggested Citation

El Mahdy, Dina and Hao, Jia and Cong, Yu, Audit Committee Financial Expertise and Information Asymmetry (March 1, 2019). 2013 American Accounting Association Annual Meeting, Available at SSRN: https://ssrn.com/abstract=3423298 or http://dx.doi.org/10.2139/ssrn.3423298

Dina El Mahdy (Contact Author)

Morgan State University ( email )

4100 Hillen Rd
Baltimore, MD 21218
United States
443-885-3967 (Phone)
443-885-8251 (Fax)

HOME PAGE: http://www.morgan.edu/

Jia Hao

Babson College ( email )

Babson Park, MA 02457-0310
United States

Yu Cong

Towson University ( email )

8000 York Road, ST 100A
Towson, MD 21204
United States

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