Effectiveness of Audit Committees in the Turkish Banking Sector

Abstract

Since the end of the first half of the 20th century there have been financial scandals happened and consequences did harm the system, from both the regulators' side and participants' side. Precautionary actions have been taken one after another to cure the all system contributors. Corporate Governance is an opportunity and a set of system that will help corporations to perform, to be managed or controlled in a healthy way on behalf of shareholders, based on fairness, transparency, accountability and responsibility concepts. Board of directors represents the shareholders in the management with responsibility of supervising the company staff. Shareholders, investors or other parties who have interest in company require reliable and sufficient information about the company and to meet these requirements, some committees are established in the board of directors. Audit committee is one of these committees basically responsible for assisting the board of directors in overseeing the financial reporting system, controlling the relationship between board of directors and both internal and external auditors. In this study our aim is to associate the characteristics of audit committee effectiveness with bank performance in the means of bank measure ratios in the Turkish banking sector. The sample consists of 28 banks classified on the official web site of the Banks Association of Turkey and 4 Private Finance Houses which are also subject to the Banking Law No. 5411. Data is gathered from banks' annual reports and regression analysis is used to investigate the relationship. Relationship between some characteristics of audit committee effectiveness and bank performance indicators is found. Even though they are not strongly associated or their contribution may be limited; number of directors, education level, proportion of independence and age of members in the audit committee are related with the ROA, ROE and NIM respectively. (English) [ABSTRACT FROM AUTHOR]