Exploration of the Association between Audit Committee Effectiveness and Sustainability Reporting During a Disclosure Regime Change

We investigate whether audit committee effectiveness is a significant determinant of the magnitude of sustainability disclosure in the annual reports of a sample of Singapore publicly listed companies during the transition period from a ‘voluntary' to ‘comply or explain' mandated regime. Our empirical analysis is based on data collected from 436 firms from April 1, 2014 to March 31, 2018 that gives rise to 1,744 firm-year obviously prompting testing using fixed-effects panel data regression modelling. The empirical findings indicate a positive and moderately significant association between audit committee effectiveness and the overall extent of sustainability disclosure. Audit committee effectiveness is also found to be positively and significantly associated with the level of disclosure covering two major sustainability sub-topics: (1) general, overview and summary details, and (2) environmental issues. Additional analysis indicates, however, that not all ten (10) components comprising overall audit committee effectiveness included in our study was significantly associated with sustainability disclosure levels overall and for major sub-topics. Audit committee effectiveness components found to be of greatest association included size, independence, financial expertise and interconnectedness of directors. Overall, our findings suggest Singapore publicly listed firms with more effective audit committees during the transition period were likely to be more transparent in the sustainability matters than other counterparts