Do audit committees reduce the agency costs of ownership structure?

Charlie X. Cai, David Hillier, Gaoliang Tian, Qinghua Wu

Research output: Contribution to journalArticle

8 Citations (Scopus)

Abstract

We investigate the agency costs of corporate ownership structure and the role of audit committees in mitigating their effect. Using China as a laboratory, where audit committees are voluntary, we study the demand for and value relevance of audit committees conditional on the various agency costs of corporate ownership. Audit committees complement existing internal governance systems by reducing the agency conflicts embedded in ownership structure. They are always value relevant, the magnitude of which depends upon the level and complexity of the ownership lattice. Audit committees substitute for inefficient external regulatory environments, particularly where weak legal institutions predominate. Our results are robust to firm size, investment level and financial leverage.
LanguageEnglish
Pages225-240
Number of pages16
JournalPacific-Basin Finance Journal
Volume35
Issue numberPart A
Early online date15 Jan 2015
DOIs
Publication statusPublished - 1 Nov 2015

Fingerprint

Audit committee
Agency costs
Ownership structure
Corporate ownership
China
Substitute
Firm size
Legal institutions
Value relevance
Agency conflict
Regulatory environment
Internal governance
Ownership
Financial leverage

Keywords

  • state-owned enterprises
  • corporate governance
  • auditing
  • audit committee
  • ownership pyramids

Cite this

Cai, Charlie X. ; Hillier, David ; Tian, Gaoliang ; Wu, Qinghua. / Do audit committees reduce the agency costs of ownership structure?. In: Pacific-Basin Finance Journal. 2015 ; Vol. 35, No. Part A. pp. 225-240.
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Do audit committees reduce the agency costs of ownership structure? / Cai, Charlie X.; Hillier, David; Tian, Gaoliang; Wu, Qinghua.

In: Pacific-Basin Finance Journal, Vol. 35, No. Part A, 01.11.2015, p. 225-240.

Research output: Contribution to journalArticle

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