Audit committee diligence: do independent directors matter?

This paper aims to examine the relationship between audit committee (AC) independence and AC meeting frequency in an emerging country where the presence of majority independent directors (IDs) on AC is a voluntary requirement.

This study uses the agency theory framework to examine the relationship between AC independence and AC meeting frequency. The empirical evidence is provided by a unique hand-collected sample of Bangladeshi listed companies. Multivariate regression analysis is used to test the relationship. Robustness checks provide further empirical support.

This paper finds a positive and significant relationship between AC independence and AC meeting frequency. This is consistent with the notion that IDs are better monitors and demand more frequent AC meetings to protect their reputations. However, having at least two IDs does not significantly affect the number of AC meetings in family firms. This evidence questions director independence in family firms.

This is a single-country study. Therefore, the findings may not apply to other countries with different institutional settings.

Unlike most prior studies, this study is based on a voluntary institutional setting where the companies are not required to have ACs comprising the majority of IDs. In such a setting, the authors find a significantly positive association between AC independence and meeting frequency compared to either a negative or insignificant relationship in the prior literature.