Do Board and Audit Committee Characteristics Affect Firm’s Cost of Equity Capital?

2015 ◽  
Vol 4 (2) ◽  
pp. 1-18
Author(s):  
Hanen Khemakhem ◽  
◽  
Ahmed Naciri ◽  
Keyword(s):  
Audit Committee ◽  
Equity Capital ◽  
Cost Of Equity Capital ◽  
Cost Of Equity

Audit committee ownership and the cost of equity capital

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ahsan Habib ◽  
Md. Borhan Uddin Bhuiyan ◽  
Julia Y.H. Wu
Keyword(s):  
Firm Performance ◽  
Financial Reporting ◽  
Audit Committee ◽  
Reporting Quality ◽  
Equity Capital ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Data Set ◽  
Content Type ◽  
The Cost

Purpose This paper aims to investigate whether audit committee ownership (consisting of both equity holdings and option holdings) is associated with the cost of equity capital. Design/methodology/approach This paper uses regression analysis to examine the association between audit committee ownership and the cost of equity capital. The data set consists of 2,825 firm-year observations for companies listed on the ASX between 2001 and 2015. This paper also conducts tests to explore the mediating effects of financial reporting quality, firm performance and the risk of reporting problems, on the relation between audit committee ownership and cost of equity capital. Findings The analyses reveal that audit committee ownership reduces the firm’s cost of equity and, thereby, support the incentive alignment view. However, the association is driven primarily by audit committee equity ownership, with option holdings having an insignificant effect. This paper also finds that firm performance mediates the association between audit committee ownership and the cost of equity capital. Practical implications Findings of the existing corporate governance research relating to the cost of equity capital and audit committee ownership remain sparse in the context of “comply-or-explain” types of regulatory environment, like that of Australia. The findings indicate that principle-based discretionary governance arrangements, e.g. compensating audit committee members with company equity, may bring benefits to firms in terms of cheaper financing. Regulators, scholars and practitioners are invited to consider further the comprehensive implications of the structure and transparency of audit committee incentives on the effective functioning of security markets. Originality/value The effects of audit committee ownership on the cost of equity capital are an issue of direct economic consequence for equity investors. The main finding of this study, namely, that a firm with higher audit committee share ownership is likely to benefit from a lower cost of equity capital, therefore adds value to the limited extant literature.

The signalling role of audit committee characteristics and the cost of equity capital

2018 ◽  
Vol 30 (3) ◽  
pp. 387-406 ◽  
Author(s):  
Ranjith Appuhami
Keyword(s):  
Audit Committee ◽  
Equity Capital ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Content Type ◽  
Listed Firms ◽  
Monitoring Process ◽  
Signalling Theory ◽  
The Cost

Purpose The purpose of this study is to examine whether audit committee characteristics influence the cost of equity capital. Design/methodology/approach Drawing on signalling theory, this study hypothesises that the presence of an AC with adequate characteristics serves as a market “signal” of the credibility of the effective monitoring process and hence affects the perception of capital providers on the cost of equity capital. The study uses a multiple regression analysis on data collected from a sample of top Australian listed firms. Findings The study finds that audit committee characteristics such as size, meeting frequency and independence are significantly and negatively associated with the cost of equity capital. However, there is no significant evidence that the financial qualifications of audit committee directors are associated with the cost of equity capital. Originality/value While there have been several studies examining the cost of equity capital, there is very limited research on the cost of capital in Australian firms. The study aims to fill this gap, in part, and contribute to the literature on corporate governance and signalling theory.

scholarly journals Pengaruh Beta Saham, Likuiditas Saham, Atribut Audit, dan Tata Kelola Perusahaan Terhadap Biaya Modal Ekuitas

2019 ◽  
Vol 16 (2) ◽  
pp. 118
Author(s):  
Olivia Meirina M ◽  
Sansaloni Butar Butar
Keyword(s):  
Corporate Governance ◽  
Audit Committee ◽  
Equity Capital ◽  
Pricing Model ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Stock Liquidity ◽  
Purposive Sampling ◽  
Good Corporate Governance ◽  
Capital Assets

Abstract This study aims to examine the effect of stock beta, stock liquidity, KAP size, industry auditor specialization, board of commissioner independence, and audit committee expertise on cost of equity capital. Cost of equity capital was measured with Capital Assets Pricing Model (CAPM). This research use secondary data and the data was collected using purposive sampling at company that is registeres at Indonesian Stock Exchange 2013-2016. Total of the sample in this research is 800 companies. The test equipment in this research using multiple regression test. The results showed that stock beta, KAP size, and independence of board of commissioner have a positive effect on cost of equity capital. Auditor industry specialization has negative effect on the cost of equity capital. Meanwhile stock liquidity and audit committee's expertise have no effect on cost of equity capital. Keywords: beta stocks, stock liquidity, audit attributes, good corporate governance, cost of equity capital Abstrak Penelitian ini bertujuan untuk menguji pengaruh beta saham, likuditas saham, ukuran KAP, spesialisasi industri auditor, independensi dewan komisaris, dan keahlian komite audit terhadap biaya modal ekuitas. Biaya modal ekuitas diukur menggunakan Capital Assets Pricing Model (CAPM). Penelitian ini menggunakan data sekunder dan pemilihan sampel menggunakan metode purposive sampling pada perusahaan yang terdaftar di Bursa Efek Indonesia periode 2013-2016. Sampel yang digunakan dalam penelitian ini sebanyak 800 perusahaan. Alat uji yang digunakan pada penelitian ini adalah uji regresi berganda. Hasil penelitian menunjukan bahwa beta saham, ukuran KAP, dan independensi dewan komisaris berpengaruh positif terhadap biaya modal ekuitas. Spesialisasi industri auditor berpengaruh negatif terhadap biaya modal ekuitas. Sedangkan likuiditas saham dan keahlian komite audit tidak berpengaruh terhadap biaya modal ekuitas. Kata kunci: beta saham, likuiditas saham, atribut audit, good corporate governance, biaya modal ekuitas

Should Audit Committee Directors Serve on Multiple Audit Committees? Evidence from Cost of Equity Capital

2019 ◽  
Vol 39 (2) ◽  
pp. 185-205
Author(s):  
Divesh S. Sharma ◽  
Vineeta D. Sharma ◽  
Paul N. Tanyi ◽  
Xiaoyan Cheng
Keyword(s):  
Audit Committee ◽  
Equity Capital ◽  
Negative Association ◽  
Data Availability ◽  
Audit Committees ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Firm Level ◽  
Multiple Directorships ◽  
Nominating Committees

SUMMARY We find a significant negative association between cost of equity and audit committee directors' simultaneous service on multiple audit committees (ACNUM). However, this association is not linear, as we find that cost of equity begins to increase when ACNUM is 1.50 for non-retired directors compared to 3.50 for retired directors. Further analyses reveal the negative association is more pronounced when a firm's information environment is strong and widely used firm-level measures of multiple directorships are not related to cost of equity. The evidence we present is consistent with the notion that investors positively perceive audit committee directors' service on multiple audit committees, but only to the extent such service does not undermine directors' ability to effectively discharge their governance responsibilities. Our study informs policymakers, boards, and nominating committees and advances the literature on multiple directorships, audit committees, and cost of equity. JEL Classifications: G12; G14; M40; M41. Data Availability: All data are publicly available from sources identified in the text.

scholarly journals Pengaruh Konservatisme Akuntansi Terhadap Biaya Ekuitas Dan Peran Komite Audit Sebagai Moderasi

2020 ◽  
Vol 2 (2) ◽  
pp. 2659-2672
Author(s):  
Olvie Andellsi ◽  
Mayar Afriyenty
Keyword(s):  
Audit Committee ◽  
Stock Exchange ◽  
Total Sample ◽  
Equity Capital ◽  
Accounting Conservatism ◽  
Manufacturing Companies ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
The Cost

This study was conducted to examine the effect of accounting conservatism on cost of equity capital and the role of the audit committee as moderation. This research is a type of causal associative research with quantitative approach. The population in this study are manufacturing companies listed on the Indonesia Stock Exchange (IDX) in 2014-2018. Samples were selected using a purposive sampling method with a total sample of 280 samples. Cost of equity capital is measured using the Ohlson (1995) model. Accounting conservatism is measured by the Givoly and Hayn (2000) model. The role of the audit committee is measured through the experience and capabilities possessed in the field of accounting and finance. The results showed that accounting conservatism had a significant negative effect on the cost of equity capital. In addition, the role of the audit committee is able to moderate the relationship between accounting conservatism and the cost of equity capital. For further research is expected to expand the object and year of research because in this study only examined manufacturing companies for the 2014-2018 observation year. In addition, further research can look for other independent variables if you want to do the same research.

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