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Audit committee adoption and firm value: evidence from UK financial institutions

Peter Agyemang-Mintah (Department of Accounting and Finance, Turun Kauppakorkeakoulu, Turku, Finland)
Hannu Schadewitz (Department of Accounting and Finance, Turun Kauppakorkeakoulu, Turku, Finland)

International Journal of Accounting & Information Management

ISSN: 1834-7649

Article publication date: 5 March 2018

1039

Abstract

Purpose

This paper aims to examine the impact of audit committee (AC) adoption on the financial value of financial institutions in the UK and also to examine the impact of the establishment of an AC on firm value during the pre/post-global financial crisis era.

Design/methodology/approach

The paper embarks on a theoretical and empirical literature review on AC adoption and its impact on a firm’s financial value. The paper uses data from 63 financial institutions and covers a 12-year period.

Findings

The empirical results indicate that the adoption of an AC by financial institutions has a positive and statistically significant impact on firm value. The results from the pre-crisis period also indicate that the adoption of an AC makes a positive and significant contribution to firm value. However, there is no impact on firm value during the post-crisis period. The results suggest that the entire UK economy experienced an economic downturn after the financial crisis (2009-2011), and financial firms were no exception.

Research limitations/implications

This study helps to fill research gaps on the relationships between ACs and firm value as they exist in UK financial institutions. These findings are important for policymakers and regulators.

Practical implications

This research will encourage firms to establish ACs.

Social implications

This new finding about the importance of firms having an AC in place is important for policymakers and regulators.

Originality/value

To the best of the authors’ knowledge, this research is the first to conduct an empirical study of the effect of AC adoption on UK financial institutions and firm value. Second, no single study has been conducted on the effects of AC adoption and its impact on either the pre- or post-financial crisis periods. This is the first paper to provide such empirical evidence.

Keywords

Citation

Agyemang-Mintah, P. and Schadewitz, H. (2018), "Audit committee adoption and firm value: evidence from UK financial institutions", International Journal of Accounting & Information Management, Vol. 26 No. 1, pp. 205-226. https://doi.org/10.1108/IJAIM-04-2017-0048

Publisher

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Emerald Publishing Limited

Copyright © 2018, Emerald Publishing Limited

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