Articlediamond2020

The impact of an audit committee's independence and competence on investment decision: a study in Bahrain

Abdullah Al-Hadrami · Ahmad Rafiki · Adel Mohammed Yaslam Sarea

28 citations0/0 files storedAsian Journal of Accounting Research

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Auditing, Earnings Management, Governance Corporate Finance and Governance Corporate Governance and Financial Management

Abstract

Purpose This study aims to investigate the impact of the audit committee's (AC) independence and competence on the company's investment decision-making in Bahraini-listed companies. Design/methodology/approach A quantitative method is used, and crosssectional data are collected through a self-administered questionnaire survey. A stratified random sample technique is adopted with a total of 409 respondents from 39 listed companies. A descriptive analysis is used to identify the characteristics of the respondents, while the correlation analysis and linear regression analyses are used to test the model and explain the relationship between variables. Findings It is found that the AC independence and AC competence have a positive and significant influence on investment decision-making. Originality/value The AC’s independence and competence are importantly crucial for the decision-makers in improving the quality of financial reporting, internal control and audit. This may lead to the increase in investors' trust on financial reports and thereby making favorable investment decisions.

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References

2002Audit committee, board of director characteristics, and earnings management 2010Understanding earnings quality: A review of the proxies, their determinants and their consequences 2004Audit Committee Characteristics and Restatements 2005Does the Market Value Financial Expertise on Audit Committees of Boards of Directors?2005Audit Committee Quality and Internal Control: An Empirical Analysis 2006Audit Committee Quality, Auditor Independence, and Internal Control Weaknesses 2009Corporate Governance and Internal Control over Financial Reporting: A Comparison of Regulatory Regimes 2001The Effects of Corporate Governance Experience and Financial-Reporting and Audit Knowledge on Audit Committee Members' Judgments

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