Corporate Governance of Banks in Asia Emerging Market: A Study on Independent Audit Committee and Liquidity

Purpose: It is widely accepted that corporate governance is one of the most prominent elements that management must improve continuously to have a more resilient bank. Consequentially, this article examines the relationship between governance mechanisms through quality of audit committee and performance of banks in eight Asia emerging markets.Design/methodology/approach: Using panel data analysis, this study investigates the relationship between fully independent audit committee, expert independent audit committee and liquidity of 109 banks in eight countries namely China, India, Indonesia, Malaysia, South Korea, Philippines, Thailand and Taiwan for a period from 2011 to 2015.Findings: Our results suggest that both audit committee full independence and expert-independent audit committee are positively related with bank liquidity.Research limitations/implications: The study is limited to listed conventional banks in eight Asia emerging market. The findings imply the independent function of audit committee without possible interference by the majority shareholders or shareholders with concentrated ownership.Practical implications: Banks in emerging Asia have been operating in more challenging and more uncertain environment after the 2007 financial calamity. The evidence from this study signifies the importance of having fully independent and expert-independent audit committee in ensuring healthy liquidity of commercial banks in Asia emerging markets.Originality/value: The findings of this study support the existing evidences on the role of corporate governance from the perspective of audit committee which is lacking in the banking institution of Asian emerging market.Keywords: Corporate Governance, Audit Committee, Banking, Asia
IntroductionGlobal financial atmosphere is in the midst of undergoing swift transition and likewise, Asian emerging markets not excluded as well to transform the operating structure of their financial systems in [...]