Audit Committee and Financial Distress in the Middle East Context: Evidence of the Lebanese Financial Institutions

Charbel Salloum (), Georges Azzi and Elias Gebrayel
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Charbel Salloum: CEREFIGE - Centre Européen de Recherche en Economie Financière et Gestion des Entreprises - UL - Université de Lorraine
Georges Azzi: CEREFIGE - Centre Européen de Recherche en Economie Financière et Gestion des Entreprises - UL - Université de Lorraine
Elias Gebrayel: CEREFIGE - Centre Européen de Recherche en Economie Financière et Gestion des Entreprises - UL - Université de Lorraine

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Abstract: The purpose of this paper is to detect the impact of audit committee characteristics on Lebanese financially distressed and non-distressed banks. Four characteristics of the audit committee are being examined; size, composition, frequency of meeting and financial expertise. The sample includes 54 ebanese banks with fiscal years-end between 2009 and 2011. The financially distressed and non-distressed banks have been identified from bank profitability. Our Results show that the financial distress of banks has a significant negative relation with the meeting frequency of the audit committee. Hence, the evidence suggests that the meeting frequency of audit committee members is an important factor as it helps the audit committee to hinder the financial distress of the bank. Meeting frequency plays an important role to ensure audit committee effectiveness. In other words, the audit committee with frequent meetings is able to help audit committee members to ensure the integrity of financial reporting, to provide better monitoring and to review effectively the operations. The establishment decision of audit committee was adopted in 2008 and was modified in 2010 in Lebanese banks. Then, this study examines an actuality subject. Consequently, this paper represented an added value to the corporate governance in Lebanese banks and shows the importance of the audit committee impact on financial performance. Future studies concentrate on the impact of managerial dominance over the board (board composition, CEO duality and management ownership) on the independence of audit committee which may have an influence on bank performance.

Keywords: Audit committees; Financial distress; Financial performance; Financial institutions (search for similar items in EconPapers)
Date: 2014-06
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Citations: View citations in EconPapers (13)

Published in International Strategic Management Review, 2014, 2 (1), pp.39-45. ⟨10.1016/j.ism.2014.09.001⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01370168

DOI: 10.1016/j.ism.2014.09.001

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