Features of ACs and banks’ performance

Dr Ehab Elbahar

Audit committees (ACs) are considered one of the main technical committees of board of directors. The ACs are mainly responsible for giving oversights to the financial reporting, controls, auditing, risks and disclosures.

Due to the importance of audit committees in  oversighting such areas mentioned above, me (Dr Ehab Elbahar) and my research team (Dr Magdi Elbanani & Dr Mohamed Elbaradie) investigated the association between the characteristics of audit committees and banks’ performance measured by ROA and ROE in Gulf Cooperation Council GCC banking sector. For this purpose we selected 68 banks in GCC during the period from (2013 - 2017) to test, analyse and investigate.

Our study concluded that the number of ACs’ meetings is not significantly affecting the performance, which means that the change in number of meetings cannot explain the change in performance.  

Regarding the committee size, we found that the higher returns is correlated with larger committee size, this conclusion indicates that the increased number of committee’s members can add more values and experience to the operation and the performance especially if they possess a good experience and qualification in area of finance, risk and governance.

In reference to presence of women directors, we can confirm that the participation of female members in audit committees in GCC region is still weak. In addition, the correlation between performance and existence of female members is insignificant. We can explain this result that the females in this region should heavily participate in such committees and effectively and efficiently affect the banks’ performance.

Regarding the percentage of qualified members, the association is insignificant with performance which means that the qualified members at the audit committees in this region up to 2017 have not added great values to affect and enhance the performance. Furthermore, the association between performance and existence of non-executive members is insignificant.

Practically, the contributions of our study are very important in the following:

We can advise ACs in GCC to be more dedicated, efficient and effective in their meetings to affect the performance positively.

If the AC’s members have the required experience and qualifications in area of finance, risk and governance, so they can add more values and experience to the operational and financial performance.

Females in ACs in GCC need to get more experience and qualifications in areas of risks, corporate governance and finance to be matured enough to add more values to the financial and operational performance.

Independent and qualified members in GCC should play greater and effective role in risks, finance and operation in which they will be able to enhance the performance and to add grater values to banking sector.