Kuala Lumpur, Malaysia – A recent study published in the International Review of Financial Analysis reveals critical insights into how audit committee (AC) characteristics influence financial stability in Malaysian publicly listed companies. Conducted by Dr. Mujeeb Saif Mohsen Al-Absy of Gulf University, Bahrain, the research underscores the role of audit committee meeting frequency, Big4 auditor engagement, and ownership concentration in shaping corporate financial resilience. 

Key Findings 

The study identifies several factors significantly associated with financial stability, measured using the Z-score (a composite indicator of profitability, leverage, and volatility): 

• Audit Committee Meeting Frequency (ACMEET): Each additional audit committee meeting correlates with a 13.6% increase in financial stability (p < 0.01). 

• Big4 Auditor Engagement (BIG4): Firms audited by Big4 firms exhibit 20.3% higher financial stability (p < 0.01), reflecting enhanced audit quality. 

• Ownership Concentration (Conc5): High ownership concentration weakens financial stability, with a 16.4% negative impact (p < 0.01). 

• Audit Committee Independence (ACIND): A 1% increase in independent AC members boosts stability by 1.32% (p < 0.05). 

• Board Size (BSIZE): Larger boards show marginally improved stability (0.116% increase per member, p < 0.01). 

Methodology and Scope 

The research analyzed 846 firm-year observations from Malaysian companies listed on Bursa Malaysia between 2013 and 2016. Key variables included: 

• ACSIZE: Number of AC members. 

• ACMEET: Annual audit committee meetings. 

• ACAE: Audit committee accounting expertise. 

• OC: Ownership concentration (Controlling shareholder influence). 

Regression models controlled for firm size (FSIZE), leverage (LEV), profitability (ROA), and industry-specific factors. The study employed Ordinary Least Squares (OLS) and Feasible Generalized Least Squares (FGLS) regressions to validate results. 

Policy and Practical Implications 

Dr. Al-Absy emphasized, “Our findings reinforce the need for regulators to mandate frequent audit committee meetings and prioritize independent directors with accounting expertise.” The study aligns with Malaysia’s Securities Commission and Bursa Malaysia in advancing the Malaysian Code of Corporate Governance (MCCG) 2017 , which promotes audit committee independence and transparency. Key recommendations include: 

1. Mandating minimum annual audit committee meetings to enhance oversight. 

1. Encouraging Big4 auditor appointments to improve audit credibility. 

1. Limiting ownership concentration through shareholder diversification reforms. 

Broader Impact 

This research contributes to global debates on corporate governance, particularly in emerging markets where concentrated ownership and weak audit oversight often exacerbate financial risks. The results resonate with initiatives like the EU’s Corporate Governance Action Plan and the World Bank’s governance frameworks, advocating for structural reforms to safeguard financial systems. 

Conclusion 

Dr. Al-Absy’s study provides actionable insights for policymakers and institutional investors seeking to strengthen financial accountability in Malaysia and beyond. By linking audit committee dynamics to corporate stability, the research highlights the critical role of governance mechanisms in mitigating earnings manipulation and systemic risk.