HCBE Faculty Articles

Title

Are all Audit Committee Financial Experts Created Equally?

Document Type

Article

Date

5-1-2009

Publication Title

International Journal of Disclosure and Governance

ISSN or ISBN

1741-3591

Volume

6

Issue

2

First Page

150

Last Page

166

Description

There is little extant empirical research that classifies audit committee members based on expertise and independence simultaneously. Additionally, there is little empirical research where different types of gray audit committee members are considered separately. We find disclosure quality (as perceived by financial analysts) is positively related to the percentage of audit committee members who are affiliated with companies providing services to the firm and who are financial experts and negatively related to the percentage of audit committee members who are related to firm executives and who are financial experts. We also find that adding independent audit committee financial experts predates improvements in disclosure quality. As regulators around the world consider implementing audit committee requirements mandated in the United States, our results call into question disqualifying all gray directors from audit committees.

DOI

10.1057/jdg.2008.25

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Peer Reviewed

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