Unravelling non-linear dynamics between audit committees and financial reporting quality in emerging markets

This study examines the impact of audit committee (AC) attributes (size, independence, and meeting frequency), on earnings manipulation practices (discretionary accruals) in emerging markets. Using panel data from 78 Egyptian listed companies (2008–2022) and dynamic panel threshold analysis, we identify non-linear, U-shaped relationships between AC attributes and earnings management. Optimal thresholds are found for AC size (3–4 members), independence (3–4 independent directors), and meeting frequency (4–6 annual meetings), beyond which additional oversight may lead to inefficiencies. These findings align with governance theories, emphasizing the importance of balancing AC attributes to enhance financial reporting quality. The study offers significant implications for policymakers and corporate boards in emerging markets. It provides evidence-based guidance on structuring effective ACs, highlighting the need for context-specific governance strategies to minimize earnings manipulation. By identifying optimal thresholds, this research contributes to the literature on corporate governance and offers actionable recommendations for improving financial transparency and accountability in emerging markets.