The role of the audit committee as a corporate governance mechanism: the case of the banking sector in Libya

Masli, A.M., 2018. The role of the audit committee as a corporate governance mechanism: the case of the banking sector in Libya. PhD, Nottingham Trent University.

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Abstract

Financial scandals in developed countries such as the USA and the UK have highlighted the need for greater transparency and credibility in order to protect shareholders and stakeholders alike. It has been argued that the audit committee (AC) is a key mechanism for achieving this transparency and protecting shareholders' interests. While there have been numerous attempts to investigate AC practice and effectiveness in developed countries, little is known about how these committees operate in developing countries such as Libya. Therefore, this research aims to: (1) explore the current role of ACs in the Libyan banking sector, (2) investigate the factors that affect their performance and (3) identify actions to enhance their effectiveness.

To achieve these aims, the study employed a combination of quantitative (questionnaire survey) and qualitative (semi-structured interviews) methods to understand how five groups of actors within Libya's banking sector (i.e. board and AC members, executive managers, and internal and external auditors) perceive the role and practice of ACs. The questionnaire survey was designed to collect initial data, while follow-up interviews sought to gain an in-depth understanding of all relevant aspects of the subject. In total, 218 survey responses were analysed, and 20 semi-structured interviews were conducted with senior directors and managers.

Although the findings broadly support agency theory's assumption that ACs play a vital role, they also indicate that ACs in the Libyan banking sector are not performing to a satisfactory standard; they play too limited a role in monitoring financial statements and enhancing the external audit process, and their effectiveness is too dependent on the strength of their relationship with the internal audit department. Institutional theory provides one possible explanation for this: ACs may be primarily designed to create legitimacy outside the organisation rather than to protect the interests of shareholders. The findings also show that a number of factors variously enable (e.g. independence, financial expertise and size) or inhibit (e.g. weak board governance and Government intervention) AC effectiveness. Finally, a number of actions were identified that could be taken to enhance the effectiveness of these committees (e.g. the proposal to strengthen the accounting and auditing profession in Libya).

The study contributes to the ongoing debates about the AC's role by being the first to investigate how this role is performed in Libyan banks, which are in the early stages of implementing corporate governance. It addresses an information gap by providing new evidence from a developing country regarding the AC's role in corporate governance and discussing the impact of fourteen enabling and inhibiting factors on AC effectiveness. Finally, it is the first step towards identifying ways of enhancing the effectiveness of these committees and encouraging regulators and shareholders in Libya to pay greater attention to corporate governance mechanisms, including ACs.

Item Type: Thesis
Creators: Masli, A.M.
Date: 2018
Divisions: Schools > Nottingham Business School
Depositing User: Linda Sullivan
Date Added: 15 Nov 2018 15:49
Last Modified: 15 Nov 2018 15:49
URI: http://irep.ntu.ac.uk/id/eprint/35005

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