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A TEST OF AUDIT COMMITTEE CHARACTERISTICS AND FREE CASH FLOWS

Samuel Jebaraj Benjamin, Kiarash Ehtiat Karrahemi

DOI: 10.22495/cocv10i2c3art4

Abstract

The study concentrates on audit committee characteristics and their influences on free cash flow. A panel of 120 firms from the trading and services industry from the year 2005 to 2008 is examined. The results show a significant and positive relationship between Audit Committee characteristics (size, independence, frequency of meetings) and free cash flows. These findings suggest that effective audit committee governance leads to availability of higher free cash flows. Our study draws upon the lack of understanding on the impact of audit committee characteristics on free cash flow along the two views; agency theory and pecking order/transaction cost theory and finds support for the later.

Keywords: Free Cash Flows, Audit Committee

How to cite this paper: Benjamin, S. J., & Karrahemi, K. E. (2013). A test of audit committee characteristics and free cash flows. Corporate Ownership & Control, 10(2-3), 611-626. http://doi.org/10.22495/cocv10i2c3art4

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