The moderating effect of audit committee chairman’s multiple directorships on the relationship between audit committee characteristics and firm performance

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Abstract

The aim of this study was to investigate the impact of corporate governance characteristics, particularly the characteristics of audit committees (ACs), on the performance of finance companies. Specifically, it sought to determine if the multiple directorships of the audit committee chairperson (ACC) moderate the relationship between the AC characteristics (i.e., independence, size, meeting frequency, and expertise) and the performance of finance companies. Multiple directorships have become an increasing issue in a number of countries around the world (Saleh, Shurafa, Shukeri, Nour, & Maigosh, 2020). In Malaysia, based on the mandatory listing requirements for the Bursa Malaysia, for example, directors can have up to 25 directorships, 15 of which can be in non-public corporations and the remaining 10 in public organizations. The study was conducted on 140 observations obtained from 28 financial companies listed on Bursa Malaysia over the period 2015–2019. The Pearson correlation coefficient and multiple linear regressions were employed. The study findings show that the corporate governance characteristics, specifically the AC characteristics (i.e., independence, size, meeting frequency, and expertise), have a substantial influence on finance company performance but the fact that the ACC has multiple directorships has no significant moderating impact on corporate performance’s associations with AC expertise and independence. On the other hand, the study results show that the fact that the ACC has multiple directorships has a strong moderating impact on the corporate performance’s associations with AC meeting frequency and size.

Keywords: Corporate Governance, Audit Committee, Audit Committee Chairperson’s Multiple Directorships, Corporate Performance, Finance Sector, Malaysia

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: The Author gratefully thanks the Deanship of Scientific Research at King Faisal University (Saudi Arabia) for supporting this research as a part of the annual funding track (Project No. AN000386).

JEL Classification: M480

Received: 02.01.2022
Accepted: 23.05.2022
Published online: 26.05.2022

How to cite this paper: Al-Matari, Y. A. (2022). The moderating effect of audit committee chairman’s multiple directorships on the relationship between audit committee characteristics and firm performance [Special issue]. Journal of Governance & Regulation, 11(2), 321–331. https://doi.org/10.22495/jgrv11i2siart11