Determinants of establishing an audit committee in Philippine Stock Exchange-listed companies

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ID: 284683
2002
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Abstract
This study examines the determinants of audit committee formation in companies listed in the Philippine Stock Exchange. Using the agency framework, the hypothesis was tested using the 1996 and 2000 data drawn from Philippine Stock Exchange. The results indicate that consistent with expectations, audit committees appear to be positively associated with large entities and companies with high leverage. However, the variables assets-in-place, number of shareholders, top-5 auditing firm, and return on investment were not statistically significant. Corporations are entities that create new economic value. The competitiveness of business is crucial in determining the competitiveness of a country. As such, countries over the world are in pursuit of introducing competitive measures and practices according to international compatibility liberalizing capital movement, and increasing the interaction between states to raise managerial efficiency and hence, enhance competitiveness of corporations or their respective nationality.With the dawning of the new millennium, corporations must also take progressive and practice measures towards meeting the global trend to survive international competition. A faultless corporate governance system is a major factor in making investment decisions in the globalized capital market. For corporations to procure long-term funds under a blanket of stability, a governance structure acknowledge internationally is a must. In respond to these demands of the present era, formation of audit committees for better corporate governance will render companies more credible domestically and internationally, and enhance transparency and efficiency of management. Audit committees can play an invaluable part in improving companies' accountability and governance structures. Used effectively, they may provide a bridge between management, the directors, the shareholders and external auditors. Many companies outside the country already have audit committees. In some cases, these have been established for many years.
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Authors Manzano, Felomina
Journal Malay Journal
Year 2002
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