| Summary: | 碩士 === 國立東華大學 === 會計與財務碩士學位學程 === 107 === The main function of the audit committee is to enhance the quality of corporate governance and monitor corporate financial reporting. Recently ,the government encourages companies to set up an audit committee actively and expects to reduce the occurrence of corporate frauds. This study investigates the association between audit committee and cost of capital in order to assure the effectiveness of audit committee on improving corporate governance, decreasing the problem of information asymmetry between creditors or investors, and increasing their confidence in the company. Using a sample of Taiwanese listed firms over the period 2009 to 2017, we measure the cost of capital by debt capital cost, equity capital cost and weighted average cost of capital. Empirical results show that setting an audit committee, the frequency of audit committee meetings and size of audit committee are all negatively associated with cost of capital, indicating that setting an audit committee can improve corporate governance and the credibility of financial reporting, reduce information asymmetry; therefore the fund providers are willing to give lower costs of capital. Finally, we implement four sensitivity tests and the results still remain robust.
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