Impact of Audit Committee Characteristics on Financial Performance: A Study of Listed Companies of Pakistan

Abstract

This study examines the effect of several audit committee characteristics on firm financial performance using evidence from non-financial companies listed on Pakistan Stock Exchange (PSX). The occurrence of high-profile corporate failures involving financial fraud, poor accounting, and lax internal controls, particularly in recent years, has raised concerns about the suitability of audit committee characteristics in carrying out a thorough monitoring and compliance role. The main results of this study suggest that five selected features of audit committee have significant impact on firm performance. Our findings suggest that there is a significant positive relationship between independence and experience of members, frequency of its meetings and firm financial performance. On the other hand, audit committee size and gender diversity appear to be having no impact on firm performance. Results of the study may aid corporate managers and boards in selecting the ideal attributes for audit committee members and in establishing corporate governance practices that will enhance the performance of the organization. The study helps decision makers understand the many requirements which an audit committee must meet in order to protect shareholder interests and the connection between audit committee attributes and business performance. As a result, this study intends to contribute to the body of knowledge by determining how audit committee five different characteristics affect corporate performance and by providing proof that how these characteristics are especially significant in Pakistan.