Audit committee and factors that affect its characteristics: the case of Greece

Abstract

Policy-makers currently place great emphasis on strengthening the audit committees’ structure. Underlying this is a belief that strengthening the audit committees’ structure may enhance the effectiveness as well as the quality of financial information. In this research, we examine the relationship between audit committee characteristics (number of AC members, percentage of independent audit committee members and percentage of board directors) and structure, accounting and corporate governance-related measures. Using a sample of 126 listed companies on the Athens Stock Exchange, we show that audit committee size has a positive relationship with the number of the firm’s employees and negative relationship with operating cash flows and the presence of an executive chairman. Moreover, we find that audit committee effectiveness has a positive relationship with the percentage of independent directors. On that basis, our findings are important since they highlight the usefulness of audit committees and offers insights to academics, practitioners and policy-makers.