Impact of Audit Committee Adoption and its Characteristics on Financial Performance: Evidence from 100 French Companies

Abstract

The aim of this paper is to examine the impact of legal creation of audit committees on financial firm performance. Precisely, we examine the impact of the establishment of audit committee, following the enactment of Ordinance No. 2008-1278, on financial firm market performance. Moreover, we investigate whether the audit committee characteristics such as independence of the members of the audit committees, the size; the accounting and financial expertise of the committee members as well as the frequency of audit committee meetings determine financial performance.

We choose two measures for performance namely ROE and ROA. We conduct a panel study for a sample of 100 French companies listed on the Paris Stock Exchange from 2007 to 2015.

The results show that the appearance of a legal text pushes the establishment of the committee but has no significant effect on the company's performance. This can be explained by the strong voluntary adoption of the audit committee following the publication of the Viénot Reports (Saada, 1998).