| Summary: | 碩士 === 國立成功大學 === 會計學系碩博士班 === 96 === In February 2002, by modification of the relevant auditing regulations applicable to publicly traded firms, Taiwan Stock Exchange (TSE) aimed to provide guidance on the establishment of audit committees, and promote the appointment of independent directors. Ever since then, local business enterprises began to have audit committees within their organization, although there was no active encouragement from the government, until the addition (2006 Jan 11) of Article 14-4 under the Stock Exchange Act, which required an publicly traded firms to employ either an audit committee or a supervisor, and, if it is deemed necessary, the regulatory authority can order the supervisor to be replaced by an audit committee. As establishment of audit committees was not made compulsory, this study chose publicly traded firms with audit committees our research sample, to investigate what are the determinants (categorized into other mechanisms of governance, agency costs and authority of CEO) for the voluntary establishment of audit committees. With a logistic regression model, our empirical evidence indicates that: under “other mechanisms of governance”, when the board of directors has a higher level of independence, firms have more tendency to voluntarily establish audit committee. With regard to “agency costs”, voluntary establishment occurs in firms with low financial leverage, high expected future growth, a long history of public trading and a tendency to diversification. Finally, for “authority of CEO”, when a firm’s chairman is also the general manager, voluntary establishment of an audit committee is not significant.
In addition, when we reduced our sample to the electronic industry only, empirical evidence shows that: the results are consistent under “other mechanism of governance”. With regard to “agency costs”, voluntary establishment occurs with firms that are small, have a long history of public trading and tendency to diversification. Finally, for “authority of CEO”, when a firm’s number of excess board superior seats is high, the voluntary establishment of audit committee is significant.
Lastly, we investigated whether relevant performance variables (financial performance, market performance and quality of financial statements) are significantly different before-and-after establishment of an audit committee. We fund that the establishment has no significant impact on short and long term financial performance, although, it does improve long term market performance, and, in general, the short and long term quality of financial statements.
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