Audit Committee and Firm Value: Evidence on Outside Top Executives as Expert‐Independent Directors

Audit Committee and Firm Value: Evidence on Outside Top Executives as Expert‐Independent Directors ABSTRACT Manuscript Type: Empirical Research Question/Issue: We examine the relation between independence of audit committee and firm value with a sample of Fortune 200 companies. Research Findings/Insights: Using a sample of Fortune 200 companies and defining top executives of other publicly traded firms as expert‐independent directors and controlling for firm specifics, board features, and individual director characteristics, we find the presence of expert‐independent directors on board and in the audit committee enhances firm value. Theoretical/Academic Implications: We provide empirical evidence to show that by focusing on this restricted definition of independent directors (expert‐independent directors), we are able to examine independence in both the board and audit committee in a different light. Practitioner/Policy Implications: We offer new insights to relate firm value of the composition of audit committee. When expert‐independent directors are of majority control of audit committee, finance‐trained directors improve firm value almost five times to that of firms with independent audit committee alone. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Corporate Governance Wiley

Audit Committee and Firm Value: Evidence on Outside Top Executives as Expert‐Independent Directors

Corporate Governance, Volume 16 (1) – Jan 1, 2008

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Publisher
Wiley
Copyright
© 2008 The Authors
ISSN
0964-8410
eISSN
1467-8683
DOI
10.1111/j.1467-8683.2008.00662.x
Publisher site
See Article on Publisher Site

Abstract

ABSTRACT Manuscript Type: Empirical Research Question/Issue: We examine the relation between independence of audit committee and firm value with a sample of Fortune 200 companies. Research Findings/Insights: Using a sample of Fortune 200 companies and defining top executives of other publicly traded firms as expert‐independent directors and controlling for firm specifics, board features, and individual director characteristics, we find the presence of expert‐independent directors on board and in the audit committee enhances firm value. Theoretical/Academic Implications: We provide empirical evidence to show that by focusing on this restricted definition of independent directors (expert‐independent directors), we are able to examine independence in both the board and audit committee in a different light. Practitioner/Policy Implications: We offer new insights to relate firm value of the composition of audit committee. When expert‐independent directors are of majority control of audit committee, finance‐trained directors improve firm value almost five times to that of firms with independent audit committee alone.

Journal

Corporate GovernanceWiley

Published: Jan 1, 2008

References

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