Audit committee chair expertise and firm performance: A case study of listed financial firms in Kenya
Loading...
Date
2024-11
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
African Journal of Accounting and Social Science Studies (AJASSS)
Abstract
This study examines the influence of Audit Committee (AC) chair expertise on
financial performance, as measured by the return on assets (ROA) of listed
financial firms on the Nairobi Securities Exchange (NSE) in Kenya. It
specifically focuses on three explanatory variables of AC chair expertise:
monitoring expertise, accounting and financial expertise, and experiential
expertise. Despite the important governance role played by audit committees,
there is limited empirical evidence exploring how the specific expertise of audit
committee chairs affects firm performance. The present study seeks to fill the gap
by assessing the relationship between AC chair expertise and financial
performance. Agency and Human Capital theories were used as the theoretical
foundation. A quantitative approach was used to collect secondary data from the
annual reports and audited financial statements of 18 listed financial firms at NSE
from 2016 to 2022, resulting in a balanced panel of 126 data points. Fixed-effects
panel regression model was used to test the hypotheses. The results revealed that
AC's experiential expertise significantly influenced the firm’s financial
performance. The study concludes that AC’s experiential expertise is the key
determinant of financial performance among listed financial firms in Kenya.
Furthermore, the study recommends that listed financial firms in Kenya should
prioritize the appointment of AC chairs in the audit committees with substantial
experience, particularly those with over three years of relevant experience.
Description
Keywords
Audit committee chair expertise, financial performance, listed financial firms, Kenya.