Managerial dominance and audit committee independence in Spanish corporate governance

The purpose of this paper is to analyse whether the independence of audit committees is affected by the degree of control exerted by managers over the board of directors. Results from a sample of 75 listed Spanish companies show that the majority of firms that voluntarily adopted an audit committee between 1998 and 2001, made an effort to guarantee their independence from management. The degree of independence is shown to be determined by the proportion of inside directors on the board, the same person holding both the CEO and board chairperson positions, and the level of management ownership. These findings may have political implications because existing regulations do not limit the presence of inside directors on audit committees. The presence of inside directors may compromise effectiveness, turning audit committees into instruments of management to provide the appearance of monitoring.

Emiliano Ruiz-BarbadilloEmail:

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Emiliano Ruiz-Barbadillo   is Professor of Accounting and Auditing in the Department of Business Economy, University of Cádiz. His current research interests are in the area of auditor independence, audit regulation, corporate governance and audit committee. He has experience with teaching Ph.D. courses on boards and governance. Estíbaliz Biedma-López   is a lecturer in the Department of Business Economy, University Pablo de Olavide. Her research interests are in the area of audit committee, corporate governance and audit quality. Nieves Gómez-Aguilar   is an Assistant Professor of Accounting and Auditing in the Department of Business Economy, University of Cádiz. Current topics of his research are auditor independence, audit committee and audit quality.