Impact of Ownership Structure on Audit Committee and Board Meeting Frequency: A Study of Non-Financial Sector of Pakistan

Abstract

The purpose of the present study is to investigate and empirically determine the effect of ownership structure on corporate board and audit committee meeting frequency in Pakistani listed companies. The study also examines the relationship between corporate board characteristics with board meeting and audit committee frequency. The explanatory variable of the present study is incorporated as the corporate board characteristics and dimensions of ownership structure. Dimension of corporate board are incorporated as, proportion of independent director, CEO duality and board size. While the ownership structure is incorporated as, concentrated ownership, insider ownership and outsider block holding. The dependent variable of the particular study are taken as corporate board and audit meeting frequency i.e. the number of board an audit meetings in a financial year. The study also incorporates control variables as, the firm size, leverage and age listing. Hypotheses were developed based on agency theory. The empirical evidence is provided by a sample of nonfinancial companies listed at Karachi stock exchange. Convenient sampling by employing secondary source data ranging from 2007 to 2012 was collected for empirical data analysis. Estimated generalized least square regression is used in panel data model to test the relationship. Robustness checks through Hausman specification test provide further empirical support. Based on 500 year firm observations, the study found that CEO duality and block holding ownership negatively impact- either on the corporate board or on the audit committee meeting frequency. Whilst the board size and proportion of independent directors in the board has a positive impact. The findings of the study are consistent with the hypothesis that insider and concentrated ownership are substitute control mechanisms. The findings also suggest that board and audit meeting are more frequent in large firms as compared to small and medium size firms. This is the first most empirical investigation providing the empirical evidence on the determinants of corporate board and audit committee meeting frequency in a contextual setting featured by nonfinancial sector of Pakistan. The study provides an agency theory-based examination of the board and audit committee meeting frequency, in a setting featured by concentrated and insider ownership.