Economic Determinants of Audit Committee Composition and Activity

摘要: In this study, I examine possible reasons behind observed differences in audit committee composition and activity. Although 97.9% of all committees for large U.S. firms have at least one outside, independent director, more than one-half the sampled also affiliated, interested director nearly 5% a member firm's upper management. These percentages fly face Treadway Report which advocates that be comprised solely directors. addition, contrary to Commission's explicit recommendation, only 38.9% meet four or times per year. Two explanations these variations are put forth examined. The first is boards with dominant CEOs reluctant active, whose sole purpose act as monitor on management's actions. second explanation constructed according economic needs firm. evidence presented throughout paper supports both points views. governance structures appear sensitive meeting monitoring litigation risk parent However, there some strong higher probability placing insiders directors relatively weaker CEOs. Audit strong-CEO tend less frequently their counterparts. results suggest may room better structure fulfill needs. paper, stronger