Audit Committee Performance: Ownership vs. Independence – Did SOX Get it Wrong?
39 Pages Posted: 22 Aug 2012
Date Written: July 17, 2012
This study documents a positive relationship between audit committee stock ownership and firm performance in large U.S. firms from 1998-2008. 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, director ownership
JEL Classification: G32, G34, G38, J41, M40
Suggested Citation: Suggested Citation