Empirical Evidence From the Effects of Audit Committee Characteristics on Corporate Efficiency

ABSTRACT Our research examines the effects of audit committee (AC) mechanisms through the viewpoint of corporate economic efficiency by analyzing 12,561 US firm‐year observations from 2002 to 2016. Our research suggests that certain AC characteristics, such as AC independence and the tenure of AC members, may impair firm efficiency because these two AC characteristics will increase monitoring strength and limit management decision‐making. Conversely, our regression results highlight that increasing gender diversity, particularly the inclusion of female AC members, can positively impact firm efficiency. Further, through the mechanism analyses, the results indicate that female directors on an AC can improve efficiency by increasing research and development (R&D) investments and financial leverage. However, senior AC members tend to make conservative decisions that can result in a reduction in the firm's leverage and, in turn, harm corporate efficiency.