ISSN: 2222-6990
Open access
Studies about audit committee ineffectiveness monitoring role and detrimental financial condition are largely focused on its characteristics (i.e., independence, expertise, size, and activity), while the busyness of the audit committee is underexplored. This study extends previous literature on the relationship between the audit committee and financial condition by examining whether the busyness of audit committee members has an impact on the risk of financial distress. It is a panel data study conducted among 119 listed manufacturing companies in Indonesia, for the period of 2012 to 2014. The findings show that the busyness of audit committee financial experts negatively affects the risk of financial distress. Busyness compromises the monitoring role in the financial reporting process, thus increasing the risk of financial distress, which is consistent with the busyness hypothesis. However, the busyness of other audit committee members has a positive impact on the risk of financial distress among safe firms, which is consistent with the reputation hypothesis. Multiple positions enable the accumulation of knowledge, experience, and information that is beneficial for the oversight function. This study contributes to the literature by providing evidence that the busyness of different audit committee members has a different impact on its monitoring role effectiveness.
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In-Text Citation: (Nelwan & Tansuria, 2022)
To Cite this Article: Nelwan, M. L., & Tansuria, B. I. (2022). Audit Committee Busyness and The Risk of Financial Distress: Evidence from Indonesia. International Journal of Academic Research in Business and Social Sciences, 12(2), 425–437.
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