Manuscript Type: Empirical
Research Question/Issue: We examine the relation between independence of audit committee and firm value with a sample of Fortune 200 companies.
Research Findings/Insights: Using a sample of Fortune 200 companies and defining top executives of other publicly traded firms as expert-independent directors and controlling for firm specifics, board features, and individual director characteristics, we find the presence of expert-independent directors on board and in the audit committee enhances firm value.
Theoretical/Academic Implications: We provide empirical evidence to show that by focusing on this restricted definition of independent directors (expert-independent directors), we are able to examine independence in both the board and audit committee in a different light.
Practitioner/Policy Implications: We offer new insights to relate firm value of the composition of audit committee. When expert-independent directors are of majority control of audit committee, finance-trained directors improve firm value almost five times to that of firms with independent audit committee alone.