Audit committee financial expertise and earnings quality: A meta-analysis

Bilal; Chen, Songsheng; Komal, Bushra

Abstract

Since the implementation of the Sarbanes–Oxley Act (SOX), a plethora of research has examined financial experts' monitoring on audit committees of financial reporting quality. However, the literature has found mixed evidence. This present study's objective is to reconcile through meta-analysis the results of 90 studies with 165,529 firm-year observations concerning the relationship between audit committee financial expertise and earnings quality. The results show that audit committee financial expertise has a positive relationship with earnings quality and that accounting financial experts have a stronger relationship with earnings quality than non-accounting financial experts. Moreover, corporate governance systems, International Financial Reporting Standards (IFRS), and SOX moderate the relationship between audit committee financial expertise and earnings quality. Additional moderators of this relationship are different proxies of earnings quality and audit committee financial expertise, financial experts' independence and busyness, the external auditor's role, and publication quality. This study provides implications for regulators in terms of tightening the definition of audit committee financial expert and the need for at least two financial experts. Further, the study identifies opportunities for future research. Specifically, we provide suggestions for the improvement of financial experts' effectiveness and the expansion of existing research. We also highlight emerging research areas.

Citation

Bilal, Chen, S., & Komal, B. (2018). Audit committee financial expertise and earnings quality: A meta-analysis. Journal of Business Research, 84, 253-270. https://doi.org/10.1016/j.jbusres.2017.11.048

• Journal Article Type: Article
• Acceptance Date: Nov 30, 2017
• Online Publication Date: Dec 7, 2017
• Publication Date: 2018-03
• Deposit Date: Nov 9, 2023
• Journal: Journal of Business Research
• Print ISSN: 0148-2963
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 84
• Pages: 253-270
• DOI: https://doi.org/10.1016/j.jbusres.2017.11.048
• Keywords: Audit committee financial expertise; Accounting financial expert; Non-accounting financial expert; Earnings quality; Meta-analysis
• Public URL: https://durham-repository.worktribe.com/output/1903519