Does audit committee quality enhance firm performance within a new corporate law?

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Abstract

The present study considers the policies and amendments as per the enactment of the Companies Act, 2013 in India regarding the audit committee measures, whether the companies abide by the amendments, and what impact it has on the firm performance. As per the earlier studies (Drogalas et al., 2016), the audit committee quality has a positive impact on the firm performance. The methodology adopted includes ordinary least square (OLS) regression techniques with the fixed effect model (FEM) and random effect model (REM). The results states that the audit committee measures follow the norms as per the Companies Act, 2013 thus maintaining the audit committee quality but the audit committee quality does not enhance the firm performance as this is due to the reason that the audit committee measures incorporation, functioning and implementation at the ground level is not up to the mark till present. Moreover, the presence of Big 4 auditors as clients improves the accounting measures of firm performance and does not hold good for market measure of firm performance thus stating that the Big 4 auditors are performing their duties very well with respect to the audit function but lacks in improvising shareholders and managers regarding the financial statements of the companies.

Keywords: Audit Committee, Firm Performance, Nifty 500, Audit Fees, Auditor Fees, Tobin’s Q, ROA, ROE

Authors’ individual contribution: Conceptualization — H.N.; Methodology — H.N.; Software — H.N.; Validation — L.R.; Formal Analysis — L.R.; Investigation — L.R.; Resources — L.R.; Data Curation — T.A.Y. and M.A.; Writing — Original Draft — H.N.; Writing — Editing & Review — T.A.Y. and M.A.; Visualization — T.A.Y. and M.A.; Supervision — T.A.Y., M.N., and G.A.; Project Administration — M.N. and G.A.; Funding Acquisition — G.A.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: E17, G17, G18, G34, G38

Received: 16.12.2024
Revised: 18.04.2025; 17.05.2025
Accepted: 04.06.2025
Published online: 06.06.2025

How to cite this paper: Naim, H., Rani, L., Yattoo, T. A., Anas, M., Nizamuddin, M., & Ahmed, G. (2025). Does audit committee quality enhance firm performance within a new corporate law? Corporate Law & Governance Review, 7(2), 112–126. https://doi.org/10.22495/clgrv7i2p12