Published Online:October 2024
Product Name:The IUP Journal of Accounting Research & Audit Practices
Product Type:Article
Product Code:IJARAP031024
Author Name:Dhanraj Sharma, Ruchita Verma and Murad Baqis Hasan
Availability:YES
Subject/Domain:Finance
Download Format:PDF
Pages:44-57
The paper examines the impact of audit committee characteristics, specifically independence, gender diversity and external audit quality, on the financial performance of publicly listed companies in India. Focusing on a sample of 65 companies over nine fiscal years (2013-2022), the study utilizes panel data analysis approach to explore the relationships between these governance factors and key financial performance metrics, including price-to-earnings ratio (PE), price-to-book ratio (PB), earnings per share (EPS) and market capitalization by enterprise value (MCAPEV). The findings reveal that audit committee independence significantly enhances firm performance, particularly in terms of PB and EPS. However, the effect of gender diversity within audit committees presents mixed results with significant impact on PE, but inconsistent effects across other performance metrics. Additionally, the study highlights the positive influence of high-quality external audits, particularly those conducted by Big Four firms on firm performance, although this effect varies across different financial metrics. These results underscore the critical role of robust corporate governance practices in improving financial outcomes, offering valuable insights for corporate boards, policymakers and regulators in emerging markets.
The downfall of prominent multinational corporations in recent years has attracted considerable attention from investors, regulators and scholars. These failures, as documented by Srivastava (2009), have been largely attributed to deficiencies in corporate governance practices, particularly inadequate external audit procedures and ineffective audit committees.