Abstract:
Past corporate collapses such as Enron, WorldCom, Xerox and similar others put a spotlight on the attention of corporate
governance mechanism. The corporate governance mechanism is the system governing and controlling the activities of
the companies. The importance of audit committees in ensuring the quality of corporate financial reporting has come
under considerable scrutiny by both the academia and corporate governance regulatory bodies. The purpose of this paper
is to examine the impact of Audit Committee (AC) attributes on the share price of Banking and finance sector in Sri Lanka.
The population of the study comprises firms listed under banking and finance companies listed in Colombo Stock
Exchange. The number of firms listed under banking and finance sector on Colombo Stock Exchange as at the time of
data collection (31st March 2018) was 72, out of which 26 firms were selected using simple random sampling method for
this study. The data was collected for the period from 2011 to 2017 and obtained from the web site of Colombo Stock
Exchange.
Size of the Audit Committee, Audit committee independence and Audit committee meetings are considered as
independent variables of the study. The dependent variable was share price of the firm which was measureed through
share price. In addition to this, firm size, company age, board size was considered as control variables in this study. To test
the hypothesis of this study, simple least square regression was utilized by using EViews 8 version.
The findings suggest a significant negative relationship between Size of the audit committee members, audit committee
meeting and share price of banking and finance companies, while board size and company age is significant and positively
related with share price. The audit committee independence is non-significant and negatively related with share price.
Further the study revealed that there is negative and non-significant relationship between firm size and share price.
In this paper, the audit committee attributes that influence the share price most efficiently are identified. Due to lack of
researches covering this area in Sri Lankan Banking and finance sector, this study would provide additional knowledge to
future researchers and academicians.
