The incentives for voluntary audit committee formation

Kerwick, Anthony. (1993). The incentives for voluntary audit committee formation Honours Thesis, School of Business, The University of Queensland.

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Author Kerwick, Anthony.
Thesis Title The incentives for voluntary audit committee formation
School, Centre or Institute School of Business
Institution The University of Queensland
Publication date 1993
Thesis type Honours Thesis
Total pages 132
Language eng
Subjects 14 Economics
Formatted abstract
This thesis investigates the incentives for Australian firms to voluntarily establish a corporate audit committee. An audit committee is viewed as part of a firm's efficient monitoring technology and as representing a mechanism for facilitating monitoring by directors (especially outside directors) and increasing auditor independence.

The hypotheses in the thesis build on the argument that the firm's choice of financing and its investment in monitoring devices are jointly determined by the nature of the firm's production-investment attributes. Consequently a number of firm-specific characteristics are identified as being likely to be associated with the decision to establish an audit committee.

The results of univariate and multivariate statistical testing provide consistent support for the hypotheses that the probability that a firm establishes an audit committee is a function of (a) the proportion of firm value represented by growth options, (b) the firm's total investment in monitoring, (c) the proportion of non-executive directors on the board and (d) the firm's reliance on debt finance. Some support was found for the argument that the decision to establish an audit committee was related to the existence of economies of scale.

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Created: Thu, 28 Oct 2010, 09:34:54 EST by Ning Jing on behalf of The University of Queensland Library