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Does audit committee substitute or complement other corporate governance mechanisms: Evidence from an emerging economy

Yousef Hassan (Department of Accounting, Birzeit University, Birzeit, Palestine)
Rafiq Hijazi (College of Business, Al Ain University of Science and Technology, Al Ain, United Arab Emirates)
Kamal Naser (Kuwait Fund, Cardiff, Wales)

Managerial Auditing Journal

ISSN: 0268-6902

Article publication date: 15 August 2017

Issue publication date: 25 September 2017



The purpose of this paper is to examine the relation between audit committee (AC) and a set of other corporate governance mechanisms in one of the emerging economies, United Arab of Emirates (UAE). In particular, the current study examines whether an effective AC can serve as a substitute or as a complement mechanism to board characteristics and ownership structure of Emirati listed non-financial companies.


Using substitution and complementary theories, a panel data from 48 nonfinancial companies listed on the UAE Stock Exchanges [Abu Dhabi Stock Exchange and Dubai Financial Market] during the period between 2011 and 2013 were used in the current study. A composite measure of four proxies has been used to measure the AC effectiveness, namely, AC size, independence, financial expertise and diligence. To test the hypotheses formulated for the study, a logistic regression model was used to identify the influence of a set of board characteristics and ownership structure variables on the effectiveness of the AC after controlling for firm size, auditor type, industry type and profitability.


While AC effectiveness appeared to be positively associated with board size and board independence, it is negatively associated with CEO duality. This points to a complementary governance relation. On the other hand, the negative relationship between AC effectiveness and each of institutional and government ownership suggests substitutive relations.

Research limitations/implications

The main shortcoming of the current study is that it examines the influence of a certain set of corporate governance factors on the effectiveness of AC. Other corporate governance mechanisms may, however, contribute to the effectiveness of AC. The findings of the study can be used by companies’ managements and regulators in the UAE to improve the corporate governance system.


To the best of researchers’ knowledge, this study provides the first evidence about the interaction among multiple governance mechanisms required by the code of corporate governance issued by the UAE Ministry of Economy in 2009. The current paper is expected to add to the limited AC literature in Middle East and North African countries in general and Arab World in particular.



Hassan, Y., Hijazi, R. and Naser, K. (2019), "Does audit committee substitute or complement other corporate governance mechanisms: Evidence from an emerging economy", Managerial Auditing Journal, Vol. 32 No. 7, pp. 658-681.



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