Board and Monitoring Committee Independence

22 Pages Posted: 21 Sep 2003

See all articles by Julie Cotter

Julie Cotter

University of Southern Queensland

Mark Silvester

University of Southern Queensland

Abstract

This study focuses on the composition of boards of directors and their monitoring committees (audit and compensation) for large Australian companies. For firms whose boards use a committee structure, much of the monitoring responsibility of the board is expected to rest with the independent committee members. We document a positive association between the proportion of independent directors on the full board and its monitoring committees, and a greater proportion of independent directors on both audit and compensation committees than the full board. Our hypotheses tests involve an examination of the impact of other mechanisms used to control agency conflicts on full board and committee independence, and the association between this independence and firm value. We find that full board independence is associated with low management ownership and an absence of substantial shareholders. Audit committee independence is associated with reduced monitoring by debtholders when leverage is low. While we predict a positive relationship between board and monitoring committee independence and firm value, our results do not support this conjecture.

JEL Classification: G34, G32, M41, M49

Suggested Citation

Cotter, Julie and Silvester, Mark, Board and Monitoring Committee Independence. Available at SSRN: https://ssrn.com/abstract=443723

Julie Cotter (Contact Author)

University of Southern Queensland ( email )

Australian Centre for Sustainable Business and Dev
Toowoomba, 4350
Australia
+61 7 4631 2916 (Phone)
+61 7 4631 1770 (Fax)

HOME PAGE: http://www.usq.edu.au/users/cotter/

Mark Silvester

University of Southern Queensland ( email )

P.O.Box 238 Darling Heights
Toowoomba, Queensland 4350
Australia

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