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Does Audit Quality Affect Companies’ Performance? Evidence From An Emerging Market

Author

Listed:
  • Malik Abu Afifa

    (Faculty of Business, Al-Zaytoonah University of Jordan)

  • Isam Hamad Saleh

    (Faculty of Business, Al-Zaytoonah University of Jordan)

Abstract

The purpose of this research is to look into the impact of audit quality on company performance. It offers empirical evidence from the Jordanian market, which is considered an emerging market. In this study, audit quality is proxied by auditor tenure, auditor industry specialization, and auditor firm size, while company performance is proxied by ROA, ROE, and EPS. A panel data analysis of all Jordanian industrial public shareholding companies listed on the Amman Stock Exchange during the timeframe (2012 to 2017) is used in this study. The primary findings are that auditor tenure has a negative influence on ROA, but auditor industry specialization and auditor firm size have no influence on ROA. Auditor firm size has a positive influence on both ROE and EPS, but auditor tenure and auditor industry specialization have a non-significant negative influence on both ROE and EPS. According to these results, companies in emerging markets should be encouraged to overcome the barriers that limit the link between audit quality and company performance. The study also suggests more research on the impact of audit quality on information asymmetry and earnings management. Future study might potentially identify characteristics that influence audit quality, particularly in emerging countries (such as MENA countries), where there has been little effort to explore the level of audit quality and its relationship with other factors.

Suggested Citation

  • Malik Abu Afifa & Isam Hamad Saleh, 2023. "Does Audit Quality Affect Companies’ Performance? Evidence From An Emerging Market," Ekonomski pregled, Hrvatsko društvo ekonomista (Croatian Society of Economists), vol. 74(2), pages 208-232.
    • Handle: RePEc:hde:epregl:v:74:y:2023:i:2:p:208-232
    DOI: 10.32910/ep.74.2.2
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    More about this item

    Keywords

    Audit quality; companies’ performance; emerging market; Jordanian market; agency conflicts;
    All these keywords.

    JEL classification:

    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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