Stakeholder perception of the determinants of audit committee effectiveness in a developing economy: evidence from the Libyan banking sector

Abstract

PurposeThis study distinctively explores the firm-level and national-level determinants of audit committee effectiveness (ACE) in the Libyan banking sector (LBS).Design/methodology/approachA mixed-methods approach has been employed to enhance the quality of the collected data and reduce the risk of bias. Five groups of actors in the Libyan banking sector were surveyed, including board members, AC members, executive managers, internal auditors and external auditors, further to interviewing a representative sample of these groups. In total, 218 survey responses were gathered, and 20 semi-structured interviews were conducted.FindingsThe study results show that AC authority, financial expertise and diligence are positively and significantly attributed to ACE, although AC independence and resources are not significantly related to ACE. The authors find that the legal and regulatory environment, government intervention, and the accounting and auditing environment are perceived as important and associated with ACE regarding national-level factors. These findings are strongly supported by semi-structured interviews and suggest that both firm-level and national-level factors are essential in understanding ACE in Libya's banking sector.Research limitations/implicationsThe study’s evidence reiterates the vital need for more concentrated work to integrate governance, legislative and regulatory reforms to ensure the effectiveness of ACs as a key corporate governance (CG) mechanism in developing economies.Originality/valueThis study extends the literature relating measures of AC inputs and outputs by examining the perception of stakeholders to understand both the firm-level and national-level factors that affect ACE in a single institutional setting. Additionally, this work adds to the limited number of recent studies examining the role of ACs in the banking sector in developing economies.

Nexus between audit committee and corporate risk: evidence from Pakistan

“…An independent AC executes a higher quality of monitoring, which results in improved financial reporting. Masli et al (2021) on the other hand, investigate the role of possible firm-level and national-level determinants on AC effectiveness and conclude that AC independence has no impact on AC effectiveness. Alzharani and Aljaaidi (2015) discovered that there is no association between AC independence and risk management.…”

Board composition, ownership structure and financial distress: insights from UK FTSE 350

“…Empirical evidence suggests that independent audit committees tend to maintain the independence of the external audit, ensuring information objectivity and reliability (Vinten and Lee, 1993;Masli et al, 2022). In the same way, prior scholarly efforts (Al-Najjar, 2011; Salloum et al, 2014) indicate that the existence of NEDs in audit committees is likely to protect the interests of shareholders and reduce the likelihood of financial distress by ensuring high quality of financial statements.…”

Estimating the Risk of Financial Distress Using a Multi-Layered Governance Criterion: Insights from Middle Eastern and North African Banks

“…Given the importance of banks in MENA economies, several CG pieces of legislation focused exclusively on banks. This contributed to the second wave of CG reforms in MENA economies (Gerged et al 2020a(Gerged et al , 2020bMasli et al 2021;Kolderstova 2010), which is primarily characterised by a focus on integrating banks' management with the region's cultural ethos. Along with these advances, regulators in the area have either undertaken steps to update their former CG codes, including the United Arab Emirates and Egypt, or reformed specific CG codes for banks, alternately, such as Tunisia and Kuwait.…”