Audit Committee versus Other Governance Mechanisms and the Effect of Investment Opportunities: Evidence from Palestine
Publication Type
Original research

Purpose – This paper aims to explore how the presence of an audit committee is associated with other
corporate governance mechanisms, i.e. board structure, ownership structure and quality of external
audit. The present study evaluated whether the presence of the audit committee complements or
substitutes other governance mechanisms in Palestinian companies. Moreover, the effect of investment
opportunities on the relationship between the formation of the audit committee and the quality of the
auditor was addressed.
Design/methodology/approach – The association between the formation of the audit committee and
other governance variables was modelled as a binary logistic model. The sample comprising 44 firms
listed on Palestine exchange for the period between 2013 and 2017, amounting to 220 firm-year
Findings – Based on the investigation, the results have indicated that board independence, the
distinction between the chairman and chief executive officer function, ownership concentration and audit
quality enhance the chance of audit committee formation, implying complementary effect. Contrastingly,
board size and board ownership serve as a substitute to audit committee formation. It has also been
found that investment opportunities act as an effectivemoderating factor that strengthens the relationship
between audit quality and the formation of the audit committee.
Originality/value – The study provides valuable insight into the interaction between multiple corporate
governance mechanisms within the economy of Palestine where the external uncertainty is high and
investment opportunities are constrained by the decisions of the occupying authority. The findings may
help regulators and policymakers in Palestine alongside those of other countries with similar
environmental features to revise and update their corporate governance codes to ensure that the best
control can be achieved, subsequently attracting more foreign and domestic investments.

Corporate Governance
Emerald Publishing Limited
Publisher Country
United Kingdom
Thomson Reuters
Impact Factor
Publication Type
Both (Printed and Online)