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Board diversity, audit committee characteristics and audit quality: The moderating role of control-ownership wedge

Author

Listed:
  • Aree Saeed Mustafa
  • Ayoib Che-Ahmad
  • Sitraselvi Chandren

Abstract

This study illustrates how control-ownership wedge impacts the monitoring role of the corporate board through the quality of audit services in Turkey. Turkey has made essential amendments in the field of external audit in order to enhance the quality of the financial report and integrate its own capital market with that of the EU. It would be of interest to examine the influence of these changes on clients' demand for high quality audit. The agency theory is integrated with the resource dependence theory to show that boards possess distinct incentives and ability to demand high quality audit to monitor management activities. Logistic regression and feasible generalized least squares (FGLS) were used for regression estimations. The results indicate that board demographics, cognitive and structural diversity of board of directors, audit committee characteristics and audit quality are complementary and control-ownership wedge weakens the relationship between them which is an unfavorable outcome for minority shareholders. Thus, this study proposes that regulators should increase law enforcement to enhance good corporate governance in Turkey to accommodate the unique features of wedge firms and provide a protected environment for minority shareholders.

Suggested Citation

  • Aree Saeed Mustafa & Ayoib Che-Ahmad & Sitraselvi Chandren, 2018. "Board diversity, audit committee characteristics and audit quality: The moderating role of control-ownership wedge," Business and Economic Horizons (BEH), Prague Development Center, vol. 14(3), pages 587-614, June.
    • Handle: RePEc:pdc:jrnbeh:v:14:y:2018:i:3:p:587-614
    DOI: 10.15208/beh.2018.42
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    Citations

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    Cited by:

    1. Elliroma Gardiner, 2024. "What’s age got to do with it? The effect of board member age diversity: a systematic review," Management Review Quarterly, Springer, vol. 74(1), pages 65-92, February.
    2. Aree Saeed MUSTAFA & Luqman Muhammed SAEED & Nishtiman Hashim MOHAMMED, 2018. "Auditor Selection in Borsa Istanbul," The Audit Financiar journal, Chamber of Financial Auditors of Romania, vol. 16(152), pages 599-599.
    3. Isabel-María García-Sánchez & Nicola Raimo & Víctor Amor-Esteban & Filippo Vitolla, 2023. "Board committees and non-financial information assurance services," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 27(1), pages 1-42, March.
    4. Michael Forzeh Fossung & Samuel Tanjeh Mukah & Kueda Wamba Berthelo & Motika Eubert Nsai, 2022. "The Demand for External Audit Quality: The Contribution of Agency Theory in the Context of Cameroon," Accounting and Finance Research, Sciedu Press, vol. 11(1), pages 1-13, February.

    More about this item

    Keywords

    Audit quality; board diversity; audit committee; control-ownership wedge; Turkey;
    All these keywords.

    JEL classification:

    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation
    • 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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