Research-Thesis: How Audit Commitee Composition Affects Firm Outcomes: Listed Firms

Abstract

This study investigates the impact of audit committee characteristics on the financial performance of listed companies, focusing specifically on audit committee size and gender diversity. With the growing importance of corporate governance, understanding how audit committee attributes influence firm outcomes, such as return on assets (ROA), has become critical. The research employs data from 265 European firms, analyzing the relationship between the composition of the audit committee and financial performance through regression analysis. The findings reveal a negative relationship between audit committee size and firm performance, indicating that larger committees may encounter coordination challenges, reducing their ability to monitor financial reporting effectively. This suggests that the benefits of a large audit committee are counterbalanced by inefficiencies in decision-making processes. Furthermore, the study finds no statistically significant impact of gender diversity on financial performance, despite the theoretical expectation that a more diverse audit committee could enhance governance. This research contributes to the existing literature on corporate governance by highlighting the importance of audit committee structure in improving firm oversight, regardless of gender diversity. The study provides actionable insights for firms aiming to enhance their governance practices and performance by optimizing audit committee composition to avoid inefficiencies and improve financial oversight.