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The purpose of this study is to examine whether the presence of an audit committee (AC) members with Chief Executive Officer (CEO) experience (supervisory experts) affects the market value of cash holdings.

To estimate the marginal value of cash holdings, this study uses the model proposed by Faulkender and Wang (2006). The sample is 2,031 firm-year observations in Korea from 2000 through 2015.

The authors find that the presence of supervisory experts on ACs has a negative impact on the value of cash holdings. This result suggests that supervisory experts on ACs weaken monitoring of managerial actions. The authors also find that the negative effect of supervisory experts on the value of cash holdings is mitigated when there are other AC members with accounting expertise.

The findings that AC supervisory expertise impairs the effectiveness of ACs, and thus destroys shareholder value have policy implications because the current regulations in many countries use a broad definition of financial expertise that includes supervisory expertise.

This is the first study that directly examines the effect of AC supervisory expertise on the value of cash holdings. The study also contributes to the literature on the role of ACs in emerging markets by documenting the limitations of corporate governance systems adopted from the Anglo–Saxon model.