Abstract
We examine the impact of audit committee (AC) characteristics (e.g. AC foreign members, AC female members, AC members with multiple directorships, AC members with share ownership and AC with financial and supervisory expertise) on forward-looking disclosure (FLD) quality and quantity. Using a sample of Omani financial companies listed on Muscat Securities Market over a five-year period (2014–2018), we find that a number of AC characteristics (such as AC size, AC female members and AC with multiple directorships) improve FLD quality. We make no such observation for FLD quantity. The results suggest that the responsibility of AC extends to improving the quality of FLD. We provide an additional analysis on the impact of AC effectiveness (ACE) on FLD quality, which suggests that companies’ compliance with CG code is beneficial for disclosure quality. We also find that the impact of ACE on FLD quality is influenced by corporate performance, leverage and the quality of external auditors. Our findings carry implications for the regulatory bodies’ efforts in encouraging companies to improve disclosure quality by considering AC characteristics as well as appointing more effective AC directors.
Highlights
Prior research shows that corporate governance (CG) mechanisms improve the quality and quantity of corporate reporting (e.g. Abdou et al 2020; Grassa et al 2020)
Since our results show that audit committee (AC) independence, AC size, AC meeting and AC financial expertise have a significant impact on forward-looking disclosure (FLD) quality and/or quantity, we create a new variable which consists of the four referred AC characteristics to composite one variable (AC Effectiveness) following Zaman et al (2011) and Al-Shaer et al (2017)
We examine the impact of AC characteristics on FLD over a 5 year period (2014–2018)
Summary
Prior research shows that corporate governance (CG) mechanisms improve the quality and quantity of corporate reporting (e.g. Abdou et al 2020; Grassa et al 2020). Oman provides a unique country context in which to examine the impact of AC characteristics on disclosure quality and quantity. We extend prior research by providing new evidence, using a unique hand-collected data, on how AC characteristics such as multiple AC directorships, AC female members and (AC with financial expertise) positively and (negatively) affect FLD quality. We emphasise how these characteristics provide ACs with specialised resources and comprehensive knowledge, and how these characteristics. This paper is the first, to the best of our knowledge, to explore the impact of a comprehensive set of AC characteristics on the quality and quantity of FLD in the context of Oman.
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