The Effects of Audit Committees and Supervisory Boards: A Comparative Study

Abstract Shareholders and stakeholders expect effective supervisory mechanism of corporate governance. Since Audit Committees (ACs) and Supervisory Boards (SBs) act simultaneously as the monitors in governance structure, it is questioned which system is more effective. Currently, both systems co-exist in Taiwan, giving the reasons to collect the data and evidence from Taiwan. Two approaches were adopted to compare corporate performance between the listed companies with ACs and those without (with Supervisors). The results of the first approach indicate that companies with Supervisors (without ACs) perform better than those companies with ACs. The results of second approach verify the results of the first approach showing adverse effects of ACs. Based on comparing both results, this study is inclined to suggest that ACs should not replace Supervisors in Taiwan. This finding may also assist users in assessing which governance structure could make companies to perform better as well as more effective within organization