Audit committee diversity and corporate scandals : evidence from the UK

McLaughlin, Craig and Armstrong, Stephen and Moustafa, Maha W. and Elamer, Ahmed A. (2021) Audit committee diversity and corporate scandals : evidence from the UK. International Journal of Accounting and Information Management, 29 (5). pp. 734-763. ISSN 1834-7649 (https://doi.org/10.1108/IJAIM-01-2021-0024)

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Abstract

Purpose This paper aims to empirically analyse specific characteristics of an audit committee that could be associated with the likelihood of corporate fraud/scandal/sanctions. Design/methodology/approach The sample includes all firms that were investigated by the Financial Reporting Council through the audit enforcement procedure from 2014 to 2019, and two matched no-scandal firms. It uses logistic binary regression analysis to examine the hypotheses. Findings Results based on the logit regression suggest that audit member tenure and audit committee meeting frequency both have positive associations to the likelihood of corporate scandal. Complementing this result, the authors find negative but insignificant relationships amongst audit committee female chair, audit committee female members percentage, audit committee qualified accountants members, audit committee attendance, number of shares held by audit committee members, audit committee remuneration, board tenure and the likelihood of corporate scandal across the sample. Research limitations/implications The results should help regulatory policymakers make decisions, which could be crucial to future corporate governance. Additionally, these results should be useful to investors who use corporate governance as criteria for investment decisions. Originality/value The authors extend, as well as contribute to the growing literature on the audit committee, and therefore, wider corporate governance literature and provide originality in that it is the first, to the knowledge, to consider two characteristics (i.e. remuneration and gender) in a UK context of corporate scandal. Also, the results imply that the structure and diversity of the audit committee affect corporate fraud/scandal/sanctions.

  • Item type:Article
    ID code:86676
    Dates:
    Date
    Event
    22 November 2021
    Published
    14 October 2021
    Published Online
    11 August 2021
    Accepted
    Notes:Copyright This author accepted manuscript is deposited under a Creative Commons Attribution Non-commercial 4.0 International (CC BY-NC) licence. This means that anyone may distribute, adapt, and build upon the work for non-commercial purposes, subject to full attribution. If you wish to use this manuscript for commercial purposes, please contact permissions@emerald.com.
    Subjects:Social Sciences > Commerce > Accounting
    Department:Strathclyde Business School > Accounting and Finance
    Depositing user: Pure Administrator
    Date deposited:05 Sep 2023 09:15
    Last modified:11 Nov 2024 14:02
    Related URLs:
    URI:https://strathprints.strath.ac.uk/id/eprint/86676
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