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Title: The impact of board composition and family ownership on audit committee formation : evidence from Hong Kong
Authors: Chau, G
Leung, P 
Keywords: Audit committee
Corporate governance
Family ownership
Independent non-executive directors
Independent chairman
Issue Date: 2006
Publisher: JAI
Source: Journal of international accounting, auditing and taxation, 2006, v. 15, no. 1, p. 1-15 How to cite?
Journal: Journal of international accounting, auditing and taxation 
Abstract: This study investigates empirically the relationship between three major corporate governance attributes (family shareholding, non-executive directors and independent chairman) and the existence of audit committees across a sample of 397 publicly traded firms in Hong Kong. The results show that at a medium level of family shareholding (between 5% and 25%), the convergence-of-interest effect is dominant and the existence of audit committees decreases. At a high level of family shareholding (more than 25%), the entrenchment effect is dominant and as a result, the existence of audit committees increases. In addition, we show that the response of investors to audit committee existence is not dependent upon family shareholding when there is an independent chairman. The findings of our study also suggest that there is a positive association between the proportion of independent non-executive directors on the corporate board and audit committee existence. In addition, the results show that the positive association between independent non-executive directors is stronger for firms with an independent chairman. Implications of these findings for regulators are discussed.
ISSN: 1061-9518
DOI: 10.1016/j.intaccaudtax.2006.01.001
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