Ownership structure and audit quality: the mediating effect of board independence

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Moncef Guizani ◽  
Gaafar Abdalkrim
Keyword(s):  
Ownership Structure ◽  
Audit Quality ◽  
Institutional Ownership ◽  
Audit Fees ◽  
Mediating Effect ◽  
Board Independence ◽  
Government Ownership ◽  
Content Type ◽  
New Perspective ◽  
The Relationship

Purpose This study aims to examine the mediating effect of board independence on the relationship between ownership structure and audit quality. Design/methodology/approach The research uses generalized methods of moments regression to test the relationship between ownership structure and audit quality. The sample consists of 162 non-financial firms listed on the Gulf Cooperation Council stock markets between the years of 2009 and 2016. To test the significance of the mediating effect, this paper uses the Sobel test. Findings Empirical findings show that companies with higher family ownership are less likely to demand extensive audit services and, as a result, pay lower audit fees. Conversely, this study finds that companies with higher active and passive institutional ownership are more likely to engage high-quality auditors and pay larger audit fees. As for government ownership, it has no significant impact on audit fees. The results also reveal that the negative (positive) effect of family (institutional) ownership on audit quality follows the path through reducing (enhancing) board independence. Further tests are conducted and support the main findings. Practical implications This study has important implications for policymakers and regulators to address the conflict between controlling shareholders and minorities by promoting higher standards of audit quality. The study findings may be useful to investors, assisting them in making better-informed decisions and aids other interested parties in gaining a better understanding of the role played by ownership structure in audit quality. The study also contributes to the strategic board behavior by bringing a new perspective on how boards engage in monitoring by requesting external audit services. This behavior is likely to be influenced by the type of controlling shareholder. Originality/value The main contribution of the present paper is to examine the board composition as a potential mediating variable between ownership structure and audit quality. Moreover, it highlights the issue of improving governance mechanisms.

The relationship between internal integration and manufacturing flexibility in the Egyptian industry

2019 ◽  
Vol 11 (1) ◽  
pp. 16-33 ◽  
Author(s):  
Magdy A. Khalaf ◽  
Mohamed Yehia El Mokadem
Keyword(s):  
Material Handling ◽  
Mediating Effect ◽  
Mediation Effect ◽  
Manufacturing Flexibility ◽  
Content Type ◽  
Research Findings ◽  
New Perspective ◽  
Internal Integration ◽  
The Relationship ◽  
Triadic Relationship

Purpose This paper aims to empirically investigate the triadic relationship between internal integration, internal flexibility and external flexibility. Design/methodology/approach This research hypothesized the mediation effect of internal flexibility on the relationship between internal integration and external flexibility. Survey data were collected and analyzed using simple and mediation regression analysis to test the study hypotheses. Findings The research finding reveals that machine, labor and material handling flexibilities; being as internal flexibility dimensions mediate the relationship between internal integration and volume and mix flexibilities; being as external flexibility dimensions. The results provided insufficient evidence on the mediating effect of routing flexibility on the relationship between internal integration and both volume and mix flexibilities. Research limitations/implications This research presents a new perspective for research studies to understand the factors that affect manufacturing flexibility. However, the nature of the surveyed sample and using of a single informant might limit the generalizability of the research findings. Practical implications This study provides useful insights for firms wishing to enhance their competitiveness through improving their flexibility. The companies should be aware of the importance of developing a suitable platform for coordinating inter-departmental activities to enhance its internal competencies, which, in turn, improve its customer-facing capabilities and boosts its competitiveness. Originality/value This paper contributes to knowledge by proposing and empirically testing the mediating effect of internal flexibility on the relationship between internal integration and external flexibility.

“Ownership structure and firm performance: the mediating role of board characteristics”

2020 ◽  
Vol 20 (4) ◽  
pp. 719-737 ◽  
Author(s):  
Md Mamunur Rashid
Keyword(s):  
Firm Performance ◽  
Ownership Structure ◽  
Indirect Effect ◽  
Positive Influence ◽  
Board Independence ◽  
Content Type ◽  
Board Characteristics ◽  
Mediating Role ◽  
The Relationship

Purpose The purpose of this study is to examine the mediating role of corporate board characteristics in the relationship between ownership structure and firm performance in the listed public limited companies of Bangladesh. Design/methodology/approach The study analyzed 527 annual reports of listed companies in Bangladesh for the years 2015-2017. The direct and indirect effect of ownership structure on firm performance was examined using AMOS 23. Baron and Kenny’s (1986) four steps procedure was used to establish the mediating role of board characteristics. Findings The results demonstrated that foreign ownership and director ownership have significant positive influence on both accounting and market based firm’s performance, while institutional ownership exhibits positive influence only on accounting-based performance (return on assets). With respect to mediating effect, the results show that board size and board independence partially mediate the relationship between ownership structure and firm performance. Research limitations/implications The major limitation of the study is that it focuses only on three years data in examining the hypothesized relationship among the variables. Practical implications Investors, regulators and managers can get evocative insights, particularly who seek to improve their company’s performance in the capital market through restructuring their ownership structure and board composition. Originality/value The study focuses on both direct and indirect effect of ownership structure on firm performance in the context of an emerging and developing economy. In examining the indirect effect, the study uses board size and board independence as the mediating variables.

The effect of audit engagement partner professional experience on audit quality and audit fees: early evidence from Form AP disclosure

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Chenyong Liu ◽  
Chunhao Xu
Keyword(s):  
Fixed Effects ◽  
Audit Quality ◽  
Early Stage ◽  
Audit Fees ◽  
Least Square ◽  
Professional Experience ◽  
Accounting Firms ◽  
Content Type ◽  
Big 4 ◽  
The Relationship

PurposeThe purpose of this study is to examine the effect of audit engagement partner's professional experience on audit quality. The authors also investigate the relationship between the audit partner's experience and audit fees in both Big 4 and non-Big 4 accounting firms.Design/methodology/approachSince the Public Company Accounting Oversight Board (PCAOB) officially enacted Rule 3211 in 2017, US accounting firms are required to disclose detailed information of engagement partners in Form AP (PCAOB, 2015b). The authors obtained a sample of 2,283 audit partners from Form AP and hand collected their individual professional experience data through Certified Public Accountant (CPA) database, corporate disclosure and social media sites (e.g. Linkedin). Econometric models with fixed effects are used in this study to test our hypotheses. Two-stage least square (2SLS) model is used in the robustness test.FindingsThe authors find that the relationship between audit engagement partner's professional experience and audit quality is concave. It indicates that audit quality is increasing during the early stage of engagement partners' career and then decreases as the partners approaching the late-career phase. Further, the authors find that partner's professional experience is positively associated with audit fees in non-Big 4 accounting firms but not significantly associated with audit fees in Big 4 accounting firms.Practical implicationsThe finding of how auditor experience impacts audit quality can be useful for accounting firms to better plan their staffing in auditing engagements. This study’s results are also helpful for small accounting firms to optimize their pricing strategy.Originality/valueThis study provides new empirical evidence about the relation between auditor professional experience and audit quality. Furthermore, the authors extend the literature of audit fee determinants by testing the joint effects of audit firm-level factors and auditor individual-level professional experience on audit fees.

scholarly journals Ownership Structure and Financial Reporting Quality: Influence of Audit Quality Evidence from Jordan

2019 ◽  
Vol 8 (4) ◽  
pp. 2212-2220
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Internal Control ◽  
Ownership Structure ◽  
Audit Quality ◽  
Positive Impact ◽  
Reporting Quality ◽  
Institutional Ownership ◽  
Mediating Effect ◽  
Financial Reporting Quality

The issues of ownership structure, audit quality, earnings management and financial reporting quality have received more consideration from public, profession and other interested parties particularly after persistent firms' scandals. Ownership structure play essential role in improve financial reporting quality (FRQ) through acting as effective internal control. This study examines the influence of the various types of ownership on the FRQ and the influence of audit quality. A stream of literature has examined the relationships between the different types of ownership, audit quality and FRQ. This study aims to connect such of these variables to produce an integrated model describing the influence of ownership structure with in the company and audit quality on FRQ. Therefore, the following relationships are tested: Ownership structure and FRQ, Mediating effect of auditor quality on these relationships, and audit quality and FRQ. Using Panel Data of 180 Jordanian company listed in ASE from 2009-2017, results showed that directors' and family ownership have significantly positive effect on FRQ through reducing earnings management; Institutional ownership has significantly negative influence on FRQ; Managerial ownership has insignificant impact on FRQ. Audit quality has partial mediating impact on these relationships. Audit quality found to has significantly positive impact on FRQ, it implies that audit quality is considered as deterrent to earnings management. This study suggests to increase the supervisory and monitoring role of institutional ownership on the management when preparing financial statements.

scholarly journals Board composition, ownership structure and voluntary disclosure: An empirical study of the listed companies in Egypt

2014 ◽  
Vol 11 (2) ◽  
pp. 415-426 ◽  
Author(s):  
Mohammed Moustafa Soliman ◽  
Aiman A. Ragab ◽  
Mohammed B. Eldin
Keyword(s):  
Ownership Structure ◽  
Voluntary Disclosure ◽  
Institutional Ownership ◽  
Ownership Concentration ◽  
Board Composition ◽  
Board Independence ◽  
Managerial Ownership ◽  
Voluntary Disclosures ◽  
Board Size ◽  
The Relationship

The aim of this study is to examine the relationship between board composition and ownership structure variables on the level of voluntary information disclosures of companies listed on the Egyptian Stock Exchange. Board composition is examined in terms of board independence; board size; and CEO duality; also, ownership structure is examined in terms of ownership concentration; institutional ownership; and managerial ownership. The results show that there is a significant negative relationship between CEO duality and voluntary disclosures. However, board independence; board size; ownership concentration; institutional ownership; and managerial ownership are not associated with voluntary disclosures. Also, the results of the regression analyses show that size and leverage of firms are significantly and positively associated with the level of voluntary information disclosures. Profitability of a firm is not significantly associated with voluntary disclosures. Finally, this paper indicates the relationship among board composition, ownership structure and corporate voluntary disclosure, and provides evidence for Egyptian regulators to improve corporate governance and optimize ownership structure.

Do women in board represent less corporate tax avoidance? A moderation analysis

2019 ◽  
Vol 40 (1/2) ◽  
pp. 114-132
Author(s):  
Rakia Riguen ◽  
Bassem Salhi ◽  
Anis Jarboui
Keyword(s):  
Audit Quality ◽  
Gender Diversity ◽  
Percent Level ◽  
Tax Avoidance ◽  
Audit Fees ◽  
Corporate Tax ◽  
Content Type ◽  
Negative Effect ◽  
The Impact ◽  
The Relationship

Purpose The purpose of this paper is to empirically examine how women in board represent moderates the relationship between audit quality and corporate tax avoidance. Design/methodology/approach The study is based on a sample consisting of 270 UK firms over the 2005–2017 period. This study is motivated by moderating regression analysis. Findings The results show that audit quality influences the corporate tax avoidance. Audit quality measured by two proxies audit specialization and audit fees has a negative effect on corporate tax avoidance. Board gender diversity “BGD” moderates the relationship between audit quality and tax avoidance. The impact of the BGD level increases as the presence of woman in the board escalated from 40 to 60 percent but, then, weakens at 10 percent level. Practical implications The findings may be of interest to the academic researchers, practitioners and regulators who are interested in discovering relation between audit quality and tax avoidance with the presence of woman in the board. This study should be of interest to tax policymakers concerned about declining corporate tax revenues. Originality/value This paper extends the existing literature by examining the moderating effect of BGD on the relation between audit quality and corporate tax avoidance using the sensitivity analysis.

How far the ownership structure is relevant for CSR performance? An empirical investigation

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ritu Pareek ◽  
Tarak Nath Sahu
Keyword(s):  
Ownership Structure ◽  
Threshold Level ◽  
Foreign Ownership ◽  
Moderating Effect ◽  
Independent Directors ◽  
Board Independence ◽  
Government Ownership ◽  
Foreign Investors ◽  
Content Type ◽  
Indian Context

Purpose Taking hints from the lacunas in the field of ownership structure and corporate social responsibility (CSR) performance of the firms in India, especially when the moderating effect of certain corporate governance mechanism comes into play, this study aims to attempt to fulfill the gap by exploring the ownership structure of the firm (i.e. foreign ownership, institutional ownership and government ownership) and the CSR performance of the firm, when moderated by board independence of the firm. In an additional analysis, the study explores the non-linear effect of foreign ownership structure on the CSR performance in the Indian context. Design/methodology/approach The study incorporates a strongly balanced panel data set of 280 non-financial National Stock Exchange 500 listed firms for the study period of 2013–2019. The study uses both static and Arellano–Bond dynamic panel model under generalized method of moments (GMMs) framework to establish the relationship between the studied variables. Findings The study acknowledges a positive impact of the foreign investors in the CSR performance of Indian firms with a higher proportion of independent directors on the board. The study further finds a contrarian role of government ownership in Indian context among the sampled firms. The study also in its extended analysis finds a non-linear inverted U-shaped relationship between foreign ownership (FO) and the CSR performance, which shows that FO positively impacts the CSR performance until a threshold level of 34% after which the curve starts declining. Practical implications One of the major implications this study provides for the corporate policymakers is that the firms with a string penchant for philanthropic activities such as CSR should be concerned with attracting more foreign investors in their shareholding. Also, a higher proportion of independent directors on the board boost the engagement of the firm in CSR works. Originality/value The moderating effect of board independence in the ownership structure–CSR relationship attempted by this study is a rare attempt in a developing economy, such as India, and offers a fresh dimension to the study. Also, the non-linearity relationship between FO and the CSR performance and the threshold level providing the twofold effect of the variables is an innovative research attempt, especially in regard to a developing country like India.

scholarly journals Ownership structure and risk of commercial banks in Vietnam

2020 ◽  
Vol 3 (SI) ◽  
pp. SI1-SI13
Author(s):  
Pham Tien Minh ◽  
Bui Huy Hai Bich
Keyword(s):  
Ownership Structure ◽  
Commercial Banks ◽  
Institutional Ownership ◽  
Generalized Least Squares ◽  
Bank Risk ◽  
Government Ownership ◽  
Data Set ◽  
Interaction Variables ◽  
The Impact ◽  
The Relationship

This study examines the impact of ownership structure on bank risk. The former is classified into four types, including concentrated, institutional, foreign, and government, while the latter is proxied by the Z-score (an inverse measure of risk). The Generalized Least Squares (GLS), which controls for heteroskedasticity and autocorrelation problems, is employed to analyze an unbalanced panel data set including 21 joint-stock commercial banks in Vietnam from 2010 to 2018. We further investigate the moderating effects of market discipline (proxied by variable listed) on the relationship between ownership structure and bank risk. The results suggest that there is a negative association between three proxies of ownership structure (ownership concentration, institutional ownership, and government ownership) and bank risk and that foreign ownership does not have any significant relationship on the risk of the bank in the direct relationship models. However, the results for the models where interaction variables are included show that foreign shareholders help improve bank stability and reduce risk in listed banks. In addition, the relationship between institutional ownership and bank risk is reinforced for listed banks, while the relationships between the other two (concentration and government) and bank risk are not influenced by the listing status.

The association between abnormal audit fees and audit quality after IFRS adoption

2016 ◽  
Vol 24 (3) ◽  
pp. 252-271 ◽  
Author(s):  
Soo-Jung Jung ◽  
Bum-Joon Kim ◽  
Ju-Ryum Chung
Keyword(s):  
Financial Reporting ◽  
Audit Quality ◽  
Audit Fees ◽  
Discretionary Accruals ◽  
Content Type ◽  
Discretionary Accrual ◽  
Ifrs Adoption ◽  
Audit Fee ◽  
The Impact ◽  
The Relationship

Purpose This paper aims to examine how the relationship between abnormal audit fees and audit quality changed after adoption of the International Financial Reporting Standards (IFRS) in Korea. Design/methodology/approach Using empirical data collected over the period from 2008 to 2013, this study analyzes the association between abnormally high/low audit fee and audit quality. This study uses linear regression to test the hypothetical relation using discretionary accrual as a proxy for audit quality. Findings This study finds that there exists no significant relationship between abnormally high audit fees and audit quality measured by the magnitude of discretionary accruals in the pre-IFRS adoption period. However, the relationship between abnormally high audit fees and the magnitude of discretionary accruals turns to be positive in the post-IFRS adoption period. These finding suggests that the IFRS enables some clients to engage more discretion in the choice of discretionary accruals and auditors charge higher audit fees in return for allowing the discretion for such clients. Practical implications This study provides insight to regulators of the need to review carefully the financial statements of firms with abnormally high audit fees, and to investors to be more cautious when using financial information about these firms. Originality/value To the best of authors’ knowledge, this is the first study to assess IFRS impact on audit fee-quality relation. Also, unique Korean audit market with intensifying competition and discounting audit fee provides interesting setting to review the impact of abnormal audit fee on audit quality.

Does ownership structure affect the quality of auditor pair composition?

2017 ◽  
Vol 15 (2) ◽  
pp. 245-263 ◽  
Author(s):  
Mishari M. Alfraih
Keyword(s):  
Logistic Regression ◽  
Ownership Structure ◽  
Audit Quality ◽  
Negative Impact ◽  
Stock Exchange ◽  
Multinomial Logistic Regression ◽  
Emerging Market ◽  
Government Ownership ◽  
Content Type ◽  
Big 4

Purpose This study examines the effects of institutional and government ownership on audit quality in Kuwait. Kuwait provides an interesting regulatory context as listed firms are legally required to appoint two external auditors from different auditing firms. This offers a unique opportunity to examine differentiation in demand for audit quality when there are three potential combinations of auditors: two non-Big 4, one Big 4 and one non-Big 4 and two Big 4. Design/methodology/approach The sample consists of all firms listed on the Kuwait Stock Exchange in 2013. Multinomial logistic regression examines the influence of ownership structure on audit quality. Analyses are controlled for the effect of company characteristics. Control variables are: firm size, complexity, growth, leverage, profitability and industry category. Findings The results show that institutional ownership is positively related to the number of Big 4 auditing firms that audit a company’s financial statements. This reflects the powerful and influential role institutional investors play in discouraging management from choosing lower-quality providers. In contrast, government ownership has a negative impact on audit quality. These findings are consistent with the hypothesis that audit quality is a function of, among other factors, the structure of equity ownership. Practical implications Given the importance of audits, knowledge of the determinants of audit quality is of particular interest to regulators, enforcement agencies and investors. The findings imply that different ownership structures have different effects on the demand for audit quality; some structures strengthen it, while others weaken it. The negative relation between government ownership and audit quality raises serious questions about the effectiveness of government in monitoring its investments. Originality/value This paper extends the literature by investigating the determinants of the choice of auditors in an emerging market where there is a joint audit requirement. It highlights the important role played by ownership structure in shaping demand for audit quality. A distinguishing feature in previous research is the classification of the audit quality proxy into two choices (Big 4 vs non-Big 4 auditors). However, the regulatory context in Kuwait means that there are three choices. Thus, unusually, a multinomial logistic regression is used for the analysis.

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