Voluntary Adoption of More Stringent Governance Policy on Audit Committees: Theory and Empirical Evidence
利用加拿大交易所政策变化，研究企业为何自愿采纳更严格的审计委员会规则，发现低合规成本和未来融资需求是主因，且采纳后企业价值提升、资本成本降低、投资效率改善。
ABSTRACT: This study exploits an exogenous change to audit committee policy in Canada and presents new evidence on how high-quality corporate governance mitigates managerial resource diversion and improves firm values. We first examine why some firms listed on the Toronto Venture Exchange (TSX Venture) voluntarily adopted the more stringent governance policy in 2004 that requires all audit committee members to be independent and financially literate. We develop a parsimonious analytical model that shows that both compliance costs and financing needs have an impact on firms' adoption decisions. Confirming the model's predictions, we find that TSX Venture firms with low compliance costs and greater future financing needs are more likely to adopt the new policy voluntarily. The analytical model also shows that high-quality audit committees enhance firm values by reducing the likelihood of managerial resource diversion. Consistent with the predictions of our analytical model, we find that the adoption decision has a positive impact on firm value and a negative impact on firms' cost of equity capital for both Toronto Stock Exchange (TSX) and TSX Venture firms. As corroborating evidence of the economic impact of the more stringent governance policy, we also show that both TSX and TSX Venture firms have improved investment efficiency following the adoption decisions. Data Availability: Data are available from public sources identified in the paper.