Audit Committee Member with Banking Expertise and the Cost of Bank Loan

• Main Authors: Liu, Pei Yi, 劉佩怡
• Other Authors: Chin, Chen Lung
• Format: Others
• Language: en_US
• Online Access: http://ndltd.ncl.edu.tw/handle/76684330845927128214

博士 === 國立政治大學 === 會計研究所 === 103 === The extant literature reveals that audit committee (AC) members with industry expertise can enhance AC’s effectiveness in monitoring the financial reporting process. In this dissertation, I focus exclusively on AC’s banking industry expertise and examine the effectiveness of an AC with a banking expert from debtholders’ point of view. First, I find that banks use more financial covenants, offer longer maturity, be less likely to require collateral, and charge lower interest rate for borrowers whose AC members have banking expertise and/or accounting expertise. Second, I further find that the association between AC expertise and loan terms is largely driven by banking expertise, either alone or in conjunction with accounting expertise than by accounting expertise alone. Further analyses reveal that borrower with a banking expertise on AC exhibits larger loan size and more lenders in a loan contract. The results are robust to a series of robustness tests, such as the join determination of loan terms, an endogeneity issue, and the deal-level analyses. Overall, my results suggest that banks value borrowers AC’s banking expertise in mitigating information risk and agency cost, thereby rewarding better loan terms for debt.