The Association between Audit Committee Members’ Multiple Directorship, Ownership and Earnings Management in Saudi Arabia

Abstract

This study examines the association between the multiple directorship and stock ownership of audit committee members and companies’ earnings management. Based on a sample of 98 Saudi nonfinancial listed companies, this study finds that the multiple directorship of audit committee members is not statistically associated with a reduction in the level of earnings management; however, the stock ownership of audit committee members is significantly related to a reduction in the level of earnings management. The results of this study add to the field of knowledge as they provide evidence on the alignment hypotheses from less developed countries (i.e. Saudi Arabia). Furthermore, these findings are useful to understand the current situation of the multiple directorship and stock ownership of audit committee members and their role in improving the monitoring system and reducing earnings management in countries with special characteristics like Saudi Arabia (i.e., with a less developed legal system and new corporate governance regulations).