Stakeholder perception of the determinants of audit committee effectiveness in a developing economy: evidence from the Libyan banking sector

Abstract

Purpose

This study distinctively explores the firm-level and national-level determinants of audit committee effectiveness (ACE) in the Libyan banking sector (LBS).

Design/methodology/approach

A mixed-methods approach has been employed to enhance the quality of the collected data and reduce the risk of bias. Five groups of actors in the Libyan banking sector were surveyed, including board members, AC members, executive managers, internal auditors and external auditors, further to interviewing a representative sample of these groups. In total, 218 survey responses were gathered, and 20 semi-structured interviews were conducted.

Findings

The study results show that AC authority, financial expertise and diligence are positively and significantly attributed to ACE, although AC independence and resources are not significantly related to ACE. The authors find that the legal and regulatory environment, government intervention, and the accounting and auditing environment are perceived as important and associated with ACE regarding national-level factors. These findings are strongly supported by semi-structured interviews and suggest that both firm-level and national-level factors are essential in understanding ACE in Libya's banking sector.

Research limitations/implications

The study’s evidence reiterates the vital need for more concentrated work to integrate governance, legislative and regulatory reforms to ensure the effectiveness of ACs as a key corporate governance (CG) mechanism in developing economies.

Originality/value

This study extends the literature relating measures of AC inputs and outputs by examining the perception of stakeholders to understand both the firm-level and national-level factors that affect ACE in a single institutional setting. Additionally, this work adds to the limited number of recent studies examining the role of ACs in the banking sector in developing economies.

Citation

Masli, A.M., Mangena, M., Gerged, A.M. and Harradine, D. (2022), "Stakeholder perception of the determinants of audit committee effectiveness in a developing economy: evidence from the Libyan banking sector", Journal of Accounting in Emerging Economies, Vol. 12 No. 2, pp. 345-379. https://doi.org/10.1108/JAEE-09-2019-0182