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Audit committee characteristics and debt choice: evidence from the S&P 500

ABSTRACT This study examines the impact of audit committee (AC) characteristics on firms’ debt choice. Specifically, we focus on AC independence, the frequency of meetings, financial experts, gender diversity, and the gender of the AC chair. The sample of this study is composed of 300 firms listed on the S&P 500. To examine the impact of the composition of the AC on debt choice, we use Ordinary Least Squares (OLS) regression and Tobit regression. The empirical findings reveal that the number of independent directors, the ratio of female directors, and a female AC chair are positively associated with public debt. This finding is in line with ‘the bank monitoring substitution hypothesis’ that the AC’s mentioned features substitute for the monitoring role of the bank. On the other hand, the frequency of AC meetings and the ratio of financial experts on the AC are negatively associated with public debt. The findings of this study offer some important insights for policy implications. For instance, firms can access the public debt market by increasing the number of independent directors, improving the gender diversity of the AC, and appointing a female AC chair.