VOLUNTARY AUDIT COMMITTEE CHARACTERISTICS IN FINANCIALLY DISTRESSED AND HEALTHY FIRMS: A STUDY OF THE EFFICACY OF THE ASX CORPORATE GOVERNANCE COUNCIL RECOMMENDATIONS

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Abstract

The aim of this paper is to address the impact of certain audit committee characteristics identified by the ASX Corporate Governance Council on improving the effectiveness of corporate audit committees on the likelihood of financial distress. Using a sample of 155 listed Australian firms, this paper finds support for the argument that the adoption of some, but not all, recommendations concerning the formation of an audit committee is beneficial for firms, which in this paper is reflected in a reduced likelihood of financial distress. In particular, the presence of a financial expert and solely non-executive directors on audit committee are associated with lower financial distress likelihood. By contrast, chairperson duality is significantly positively related to the probability of financial distress.

Keywords: Audit Committee, Financial Distress, Voluntary Governance System, Agency Theory, Corporate Governance

How to cite this paper: Miglani, S. (2014). Voluntary audit committee characteristics in financially distressed and healthy firms: a study of the efficacy of the ASX corporate governance council recommendations. Corporate Ownership & Control, 12(1-2), 308-321. https://doi.org/10.22495/cocv12i1c2p8