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Revenue Recognition

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Revenue Recognition
Pacific-Basin Finance Journal 23 (2013) 1–24

Contents lists available at SciVerse ScienceDirect

Pacific-Basin Finance Journal journal homepage: www.elsevier.com/locate/pacfin

The role of the audit committee and the informativeness of accounting earnings in East Asia
Tracie Woidtke a, Yin-Hua Yeh b,⁎ a b

Department of Finance, Corporate Governance Center, University of Tennessee, United States
Graduate Institute of Finance, National Chiao Tung University, 1001 Ta-Hsueh Rd., Hsinchu City, Taiwan 30010

a r t i c l e

i n f o

Article history:
Received 12 March 2012
Accepted 18 December 2012
Available online 29 December 2012
Jel classification:
G34
G32
Keywords:
Corporate governance
Ownership
Earnings informativeness
Audit committee

a b s t r a c t
Policy makers around the world have focused on corporate governance reform since the Asian financial crisis and scandals in the United
States such as the Enron debacle. In particular, policy makers have focused on the establishment of independent audit committees to improve investor confidence in reported accounting information. In a sample of East Asian companies, we find that the negative relation between concentrated control and earnings informativeness that was documented prior to the Asian financial crisis persists in a more recent period, even though many corporate governance reforms have been adopted since the crisis to improve financial disclosure. We do, however, find that earnings informativeness is strengthened by both fully independent audit committees and audit committees with a majority of independent directors with accounting financial or legal expertise.
In addition, the increased reliability that is associated with these audit committee characteristics appears to more than offset the detrimental effect that is associated with concentrated control. The results in this paper suggest that an emphasis on audit committee independence alone may not be enough to enhance


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