Better Effectiveness with Audit Committees: Evidence from China

This study empirically explores China’s supervisory mechanisms whether the listed companies with Audit Committees (G2) are more effective than those without (G1). Using a panel data base of 2148 compared to 1873 firm-year observations over the 2005 to 2007 period by the multiple linear regressions, the findings report Chinese listed companies with Audit Committees have better independence, expertise and activities proved by 12 of 15 variables of better G2 coefficient than G1; and statistically significant evidences present in 5 aspects, the listed companies with Audit Committees have (1)less proportion of independent directors receiving remuneration; (2-3) more legal and internal auditing expertise in Supervisory Boards; (4) more meeting times on the BoD; and (5)the quantity of Supervisory Boards’ size may not impact upon the effective quality of supervisory mechanisms. The findings of which may provide impetus for further research in Chinese setting and help refine general knowledge on the role of supervisory mechanisms in corporate governance.