The Role of Audit CommitteeAnalysis of the Influence of Financial Expertise

Resumo

The main objective of this thesis is to investigate the impact of audit committees, and particularly their financial expertise, on firms’ decisions. Specifically, this thesis addresses four sub-objectives, which are developed in four different empirical studies. The first two empirical studies aim to perform a systematic review of the literature on audit committees and on financial expertise as a significant attribute of directors. The third study aims to analyze the association between the audit committee directors' financial expertise and the readability of the management reports. The fourth study examines the association between the financial expertise (considering both accounting and non-accounting) of female directors in the audit committee and the voluntary disclosure of financial forward-looking information. This thesis deals with two major lines of research, corporate governance and information disclosure, which have been addressed from different perspectives and have acquired an important role in various research areas, including accounting, business, economics, ethics, finance, law, management, among others. In particular, the evolution of the business world, the occurrence of severe financial scandals of large firms, and the increased regulation in recent years, have led to a rise in the academic interest in both audit committees and the corporate reporting process. Despite the literature having investigated many topics related to this corporate governance mechanism, evidence remains far from definitive, and more findings are required in order to obtain a better picture of this issue. For the development of this thesis, documents from Thomson Reuters Web of Science database for the period 1900 - 2020 (1,690 and 287 documents respectively) have been used. In addition, data have been obtained from Firms listed on the Madrid Stock Exchange for the period 2013-2015 and Firms from Standard & Poor's Index in 2016. Finally, information on 788 audit committee members and 374 biographies from female has been collected manually. audit committee directors. The results obtained in the systematic reviews present the importance of going more thoroughly into the exploration of the ethical and social role that audit committees’ financial experts can play, even more so in a context of political, economic, and social tension. Furthermore, in the third study carried out the results obtained highlight that financial experts, specifically financial accounting experts, influence the information disclosure process by reducing the readability of management reports. However, this should not be a negative indicator for companies as long as this can be explained because financial experts lead to the disclosure of financial or accounting issues that have a more syntactically complex terminology, but they are useful to investors and thus reduce uncertainty. Finally, in the fourth study developed the results obtained do not show that women have an effect on financial forward-looking information unless they have financial expertise (accounting or non-accounting). These results show that it is necessary to nurture the audit committee of directors with particular skills and expertise. Therefore, the appointment of women to committees must be justified by their expertise rather than meeting quotas. In this way, quality is ensured in the committees for decision making. All these findings are expected to have direct implications at the academic, professional and regulatory levels. The main implications extracted from the bibliometric analyzes are; the need to delve deeper into the theoretical foundation, learn about the most fruitful future lines of research and achieve a higher quality in the publications favoring a greater research network. In relation to the other two studies developed, from a business perspective, the results can help companies to gain a better understanding of corporate governance mechanisms and matters related to the selection strategies of audit committee members. On the other hand, regulators could benefit from this evidence to clarify certain issues related to the boards of directors and thus improve their initiatives in relation to the corporate governance of companies. In the political sphere, both in Spain and in neighboring countries, there is a firm conviction that good corporate governance is the basis for the functioning of the markets, since it favors credibility and stability, and helps to promote growth and wealth generation. Likewise, corporate governance is an important factor in the long term to guarantee sustainability and the ability to create jobs.