The impact of ownership structure on external audit quality: A comparative study between Egypt and Saudi Arabia
-
DOIhttp://dx.doi.org/10.21511/imfi.19(2).2022.07
-
Article InfoVolume 19 2022, Issue #2, pp. 81-94
- Cited by
- 741 Views
-
403 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
This study aims to compare the impact of the ownership structure as one of the essential internal mechanisms of governance on the proxies of external audit quality on a sample of 82 listed Egyptian companies and 77 listed Saudi companies from 2014 to 2021, employing the OLS regression analysis. The current study found mixed results according to the type of ownership and indicators of the external audit quality, both in Egyptian and Saudi companies. The results showed a significant effect of board ownership, management ownership, and family ownership on audit quality. However, the direction of this effect varied between positive or negative in Egyptian or Saudi companies, and the effect was sometimes insignificant. On the contrary, the results showed an insignificant effect of government ownership on audit quality in Egyptian and Saudi companies, or the effect was sometimes significant. The study results may help investors and stakeholders understand the ownership structure’s role as one of the internal governance mechanisms on audit quality. Studies show the effectiveness of governance mechanisms, whether internal or external, according to the institutional environment from one country to another. It also contributes to the use of various indicators to measure the quality of auditing and the quality of financial reports, such as returning the financial statements as an indicator of financial reports and an indicator of audit quality at the same time.
- Keywords
-
JEL Classification (Paper profile tab)M40, M41, M42, M48
-
References20
-
Tables10
-
Figures1
-
- Figure 1. Research models
-
- Table 1. Distribution of the sample
- Table 2. The study variables and measurement of each variable
- Table 3. Descriptive statistics
- Table 4. Correlation matrix
- Table 5. Variance inflation factors
- Table 6. Regression for ownership types and audit quality (Audit fees)
- Table 7. Regression for ownership types and audit quality (Big 4)
- Table 8. Regression for ownership types and audit quality (Restatement)
- Table 9. Regression for ownership types and audit quality (Specialization)
- Table 10. Summary of the study’s hypotheses testing results
-
- Akhidime, A. (2015). Board structure, corporate characteristics and audit quality of Nigeria banks. International Journal of Economics, Commerce and Management, 3(6). 832-846.
- Almazan, A., Hartzell, J. C., & Starks, L. T. (2005). Active institutional shareholders and costs of monitoring: Evidence from executive compensation. Financial Management, 34(4), 5-34.
- Al-Rassas, A. H., & Kamardin, H. (2016). Earnings quality and audit attribute in high concentrated ownership market. Corporate Governance.
- Asharq Al Awsat. (2020).
- Azoury, N., & Bouri, E. (2015). Principal–principal conflicts in Lebanese unlisted family firms. Journal of Management & Governance, 19(2), 461-493.
- Chen, R., Zhen Qi, C., & Lin, T.W. (2011). Ownership structure & corporate governance among Chinese securities firms. International Journal of Management, 28(3), 789-805.
- Desender, K. A., Aguilera, R. V., Crespi, R., & GarcÍa-cestona, M. (2013). When does ownership matter? Board characteristics and behavior. Strategic Management Journal, 34(7), 823-842.
- El-Dyasty, M. M., & Elamer, A. A. (2021). Evidence from Egypt is the effect of ownership structure and board characteristics on auditor choice. International Journal of Disclosure and Governance, 18(4), 362-377.
- Eulaiwi, B., Al-Hadi, A., Taylor, G., Al-Yahaee, K. H., & Evans, J. (2016). Family ownership concentration, outside board directorships, and board nomination committees. Emerging Markets Review, 28(3), 61-88.
- Guizani, M., & Abdalkrim, G. (2021). Ownership structure and audit quality: the mediating effect of board independence.
- Hasnan, S., Aziz, F., Mohamed, M., Sulaiman, N., & Aziz, A. (2017). Ownership structure and financial Restatement in Malaysia.
- Khan, A., & Subramaniam, N. (2012). A family firm, audit fee, and auditor choice: Australian evidence. In Financial Markets & Corporate Governance Conference.
- Kheirollah, F., Behshour, I. and Azad, M. (2014). Investigating the effect of corporate governance mechanisms (company ownership structure) on audit quality. Indian Journal of Science Resources, 4 (3), 465-469.
- Mustapha, M., & Ahmad, A. (2011). Agency theory and managerial ownership: evidence from Malaysia. Managerial Auditing Journal, 26(5), 419-436.
- Niskanen, M., Karjalainen, J., & Niskanen, J. (2011). Demand for audit quality in private firms: evidence on ownership effects. International Journal of Auditing, 15(1), 43-65.
- O’Sullivan, N. (2000). The impact of board composition and ownership on audit quality: evidence from large U.K. companies. The British Accounting Review, 32(4), 397-414.
- Park, B. (2019). Audit committees and managerial influence on audit quality: ‘voluntary’ versus ‘mandatory’ approach to corporate governance. Australian Accounting Review, 29(1), 266-280.
- Qawqzeh, H. K., Bshayreh, M. M., & Alharbi, A. W. (2021). Does ownership structure affect audit quality in countries characterized by weak legal protection of the shareholders? Journal of Financial Reporting and Accounting, 19 (5), 707-724.
- Rajgopal, S., Srinivasan, S., & Zheng, X. (2021). Measuring audit quality. Review of Accounting Studies, 26(2), 559-619.
- Sori, Z. M., & Mohamad, R. S. (2008). Governance structure and external audit price: evidence from an emerging economy. International Journal of Economics and Management, 2(2), 259-279.