The Effect of Audit Committee Shareholding, Financial Expertise and Size on Interim Financial Disclosures

Accounting and Business Research, 35 (4): 327-349, 2005

Posted: 2 May 2018

See all articles by Musa Mangena

Musa Mangena

University of Nottingham Business School

Richard Pike

University of Bradford

Date Written: June 1, 2005

Abstract

In recent years, corporate failures and accounting irregularities have led to concerns about the effectiveness of audit committees in the financial reporting process. In response, corporate governance committees in different countries have made specific recommendations designed to enhance the role of the audit committee in executing its financial reporting oversight duties. We investigate in this study, the effect of some of these recommendations by empirically examining the relationship between selected audit committee characteristics and the level of disclosure in interim reports of a sample of 262 UK listed companies. Specifically, the audit committee characteristics examined are shareholding of audit committee members (as a proxy for audit committee independence), audit committee size and audit committee financial expertise. Employing both a weighted and unweighted index to measure interim disclosure, the results indicate a significant negative association between shareholding of audit committee members and interim disclosure. Our results provide evidence of a significant positive association between interim disclosure and audit committee financial expertise. We find no significant relationship between audit committee size and the extent of disclosure in interim reports. Overall, however, our results suggest that audit committee characteristics have an impact on its monitoring effectiveness of the financial reporting process. These results have important implications for corporate governance policy-makers who have a responsibility to prescribe appropriate corporate governance structures to ensure that shareholders are protected.

Keywords: corporate governance, audit committee, disclosure, interim reports

Suggested Citation

Mangena, Musa and Pike, Richard, The Effect of Audit Committee Shareholding, Financial Expertise and Size on Interim Financial Disclosures (June 1, 2005). Accounting and Business Research, 35 (4): 327-349, 2005, Available at SSRN: https://ssrn.com/abstract=3162573

Musa Mangena (Contact Author)

University of Nottingham Business School ( email )

United Kingdom

Richard Pike

University of Bradford ( email )

Bradford
Bradford, West Yorkshire BD9 4JL
United Kingdom
01274 384 343 (Phone)
01274 385 680 (Fax)

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