Do audit committees reduce the agency costs of ownership structure?

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

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

24 Citations (Scopus)
249 Downloads (Pure)


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.
Original languageEnglish
Pages (from-to)225-240
Number of pages16
JournalPacific-Basin Finance Journal
Issue numberPart A
Early online date15 Jan 2015
Publication statusPublished - 1 Nov 2015


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


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