We extend the literature on director independence and the role of the board by focusing on the importance of audit committees in the contracting process. We find that the demand for independent and active audit committees is positively related to the demand for accounting certification. In particular, we find that the likelihood of a firm having a completely independent and active audit committee is negatively related to firm growth opportunities and managerial ownership and positively related to firm size and leverage. Our results suggest that audit committees are an important organizational construct related to the demand for accounting certification.

We study shareholder proposals across a period of substantial activity and find systematic differences both across sponsor identity and across time. To measure the success of shareholder activism, we examine voting outcomes and short-term market reactions conditioned on proposal type and sponsor identity. The voting analysis documents that sponsor identity, issue type, prior performance and time period are important influences on the voting outcome. Proposals sponsored by institutions or coordinated groups appear to act as substitutes gaining substantially more support than proposals sponsored by individuals. The nature of the stock market reaction, while typically small, varies according to the issue and the sponsor identity.