Audit Committee and Banking Stability: A Case of Listed Banks in Ghana

Abstract

This study sought to investigate how the effectiveness of the audit committee influences banking stability in Ghana. In doing so, the researcher aimed at examining the effect of independence of the audit committee, the size of the audit committee, as well as how the relationship between other variables such as the composition of gender, bank size, among others influence the stability of the bank. Employing a quantitative research design together with a descriptive approach, the researcher collected secondary data on some listed banks operating in the country over the period 2006 to 2016 from the Ghana Stock Exchange (GSE). The study employed a panel data analysis in analyzing the gathered data. The study found out that the size of an audit committee, as well as its gender composition has positive impacts on bank stability and that audit committee independence, the size of board, and bank size have negative impacts on stability. The study therefore concluded that although the independence of the audit committee is relevant for a good auditing job, it does not necessarily ensure the stability of a bank. Rather, the audit committee’s size and its gender composition do as these two factors seem to bring on board diverse individuals with a variety of skills, knowledge, and abilities necessary for the job at hand so as to ensure the stability of the bank. The study therefore recommended that banks should take keen interest in the size of the audit committee as well as its gender composition as it is believed that numbers may come along with some significance like allowing for diverse skills, knowledge, and information among others. They should however not disregard the independence of the audit committee as it is relevant too. Future study should however be directed at the role of the audit committee on some performance indicators of the banking industry as it is the performance of these banks that ensure their stability and not directly on stability which is very difficult to determine.