Audit committee effectiveness and company performance: Evidence from Egypt

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Abstract

The purpose of this paper is to investigate the impact of audit committee characteristics (size, independence, experience, gender diversity, and frequency of meetings) on the company’s financial performance (ROA and ROE) in Egypt. In 2016, the Egyptian Stock Exchange announced a new listing requirement for the audit committee members’ characteristics to enhance its effectiveness. Data are gathered from the board of directors (BOD) and annual reports of the EGX 30 index non-financial listed companies in Egypt for the period of 2016–2018. Data is analyzed by using panel data cross-section data analysis and correlation analysis. The findings reveal that the audit committee size has a significant relationship with ROA only and committee members’ experience is significantly related with ROE only. The other characteristics (independence, meetings, and gender diversity) have no impact on ROA and ROE. Such findings contribute to the literature by providing new understandings regarding the audit committee as a key component of corporate governance and its impact on financial performance. It could also guide and improve the boards’ selection of the audit committee members and gives Egyptian regulators a better understanding of the impact of their latest listing requirements on protecting the shareholders’ interests and increasing their confidence through having transparent financial statements.

Keywords: Corporate Governance, Audit Committee, Auditor Independence, Experience, Firm Performance, Egyptian Stock Exchange

Authors’ individual contribution: The Author is responsible for all the contributions to the paper according to CRediT (Contributor Roles Taxonomy) standards.

Declaration of conflicting interests: The Author declares that there is no conflict of interest.

Acknowledgements: We would like to acknowledge the British University in Egypt for providing us with the databases that have been used in this paper.

JEL Classification: C22, C83, G32, G38, M42

Received: 03.02.2021
Accepted: 20.04.2021
Published online: 22.04.2021

How to cite this paper: ElHawary, E. (2021). Audit committee effectiveness and company performance: Evidence from Egypt. Journal of Governance & Regulation, 10(2), 134–156. https://doi.org/10.22495/jgrv10i2art12