The Effect of Audit Committee Characteristics on Firm Value: Evidence from Firms Listed on the Egyptian Stock Market

Abstract

The audit committee is the most important subcommittee of the board of directors due to its specific role of protecting the interest of shareholders in relation to financial oversight. It plays a very important role in corporate governance and the internal audit procedure by monitoring managers’ activities concerning financial disclosure. This study seeks to identify the unique contributions made by each proxy and to provide compelling evidence that demonstrates how an Audit Committee mechanism impacts Firm Value. This paper aims to investigate how the audit committee’s characteristics affect firm value in Egypt. Using a sample of 80 non-financial Egyptian companies listed on the Egyptian Stock Exchange for the eight financial years from 2012 to 2019. Audit Committee characteristics are represented by Audit Committee independence, Audit Committee size, the frequency of Audit Committee meetings, Audit Committee expertise, and Audit committee gender. Tobin’s Q is used to measure Firm value. Panel data regression was used in the archival modeling study. Using a multiple regression model to test the relationship among the variables, the results provide evidences that Audit Committee Expertise, Audit Committee Size, Audit Committee Independence and Audit Committee Gender have a significant positive impact on firm value. Otherwise, Audit Committee Meetings have a positive relation but insignificant with firm value. This study offers numerous recommendations to the regulatory authorities in Egypt on how to improve and strengthen the internal governance systems of businesses, particularly the Audit Committee.