The Impact of Audit Committee Characteristics on Agency cost and Enhancement of Financial Performance: Evidence from Saudi Listed Firms

Abstract

Abstract: This research aims to explore the impact of audit committee characteristics on agency costs and financial performance in firms listed on the Saudi Stock Exchange with the exception of financial and insurance companies (which have different practices). To achieve this aim, two models are constructed. These models are examined by a multiple regression via generalized least squares (GLS). The research finds that audit committee characteristics were shown to have no effect on agency costs, with the exception of audit committee independence, which had an impact on agency costs. Moreover, it reveals that there is a positive and significant relationship between the presence of a financial expert in the audit committee and independence of audit committee with financial performance, while other characteristics were shown to different results (however, insignificant). The study recommends that companies and legislators should have paid attention to and strengthen the role of the financial expert in audit committee and its independence.