Association between independent audit committee members' human‐resource features and underpricing: The case of Singapore IPOs from 1997‐2006

Abstract

Purpose

The primary objective of this paper is to examine the association between the seven human‐resource features (spanning three major themes: qualifications and credentials; business and initial public offering (IPO) launch experience; and diversity) of independent audit committee members and the level of underpricing.

Design/methodology/approach

A sample of 410 Singapore IPOs listing on the stock exchange of Singapore from January 1, 1997 to December 31, 2006 was used.

Findings

Empirical results overall suggest no overwhelming association between the human‐resource features of IPO audit committees and underpricing. Rather, the findings suggest only some specific human‐resource features (e.g. presence of an independent audit committee member with accounting qualifications and credentials) are of significance. Others (e.g. gender diversity of independent audit committee members) have little or no association. Also, results do not suggest a major category of human‐resource features (i.e. qualifications and credentials, business and IPO launch experience, or diversity) is associated with underpricing. Time also does not appear to affect the results.

Practical implications

As human‐resource features tended to increase rather than lower an IPO's cost of capital, or had not influence at all, our findings generally do not support some policymakers' arguments for the introduction of mandated uniform audit committee structures. Rather, the results support flexibility to determine the properties of the audit committee.

Originality/value

This study is one of the first (particularly outside the USA) to investigate linkages between audit committee human‐resource features and underpricing. Whilst acknowledging some caveats associated with this study, such as focusing on a single nation, this paper contributes relevant insights to the debate about audit committee effectiveness.

Citation

Mitchell Van der Zahn, J.W., Singh, H. and Singh, I. (2008), "Association between independent audit committee members' human‐resource features and underpricing: The case of Singapore IPOs from 1997‐2006", Journal of Human Resource Costing & Accounting, Vol. 12 No. 3, pp. 179-212. https://doi.org/10.1108/14013380810919840