IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-04803149.html
   My bibliography  Save this paper

Do BIG-4 auditors perform a corporate governance role in the Moroccan context? Evidence from accounting and market-based performance measures

Author

Listed:
  • Nasredine Fathelkhir

    (Université Hassan 1er [Settat])

  • Said Karam

    (Université Hassan 1er [Settat])

  • Othman Gaga

    (Université Hassan 1er [Settat])

Abstract

The research on external audit quality has attracted flourishing interest from several scholars following financial scandals and corporate failures, Nonetheless, results and empirical findings regarding the effect of audit quality on firm performance are still inconclusive. Our study is designed to investigate the impact of external audit quality on financial performance using both accounting and market-based performance indicators. Based on a sample of 38 listed firms in the Casablanca stock exchange, covering the period 2011-2021, this study employed a pooled OLS model to assess the effect of audit quality on accounting and market-based performance measures. For robustness check, we employed the Feasible Generalized Least Square (FGLS) estimator to account for potential issues of heteroskedasticity and autocorrelation. Our findings support the main hypothesis and the agency's theoretical foundations, indicating that audit brand name reputation and audit quality change exhibit significant positive impacts on financial performance and firm valuation. To the best of our knowledge, our study is the first to examine the effect of audit quality on firm performance and valuation in the Moroccan context and use audit quality change as a robustness proxy for audit quality. Nevertheless, our research suffers from some limitations, related to the methodological approach, possible omissions of some variables, econometric issues related to endogeneity concerns and external validity of our results due to the limited number of observations.

Suggested Citation

  • Nasredine Fathelkhir & Said Karam & Othman Gaga, 2024. "Do BIG-4 auditors perform a corporate governance role in the Moroccan context? Evidence from accounting and market-based performance measures," Post-Print hal-04803149, HAL.
    • Handle: RePEc:hal:journl:hal-04803149
    DOI: 10.5281/zenodo.14025066
    Note: View the original document on HAL open archive server: https://hal.science/hal-04803149v1
    as

    Download full text from publisher

    File URL: https://hal.science/hal-04803149v1/document
    Download Restriction: no
    File URL: https://libkey.io/10.5281/zenodo.14025066?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Conheady, Brian & McIlkenny, Philip & Opong, Kwaku K. & Pignatel, Isabelle, 2015. "Board effectiveness and firm performance of Canadian listed firms," The British Accounting Review, Elsevier, vol. 47(3), pages 290-303.
    2. Wellalage, Nirosha Hewa & De Zoysa, Anura & Ma, Shiguang, 2023. "Corporate Cash Holdings and Firm Performance in India: An Empirical Investigation of the Effects of Audit Quality and Firm Growth," American Business Review, Pompea College of Business, University of New Haven, vol. 26(1), pages 122-147, May.
    3. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    4. Georgeta Vintilă & Mihaela Onofrei & Ştefan Cristian Gherghina, 2015. "The Effects of Corporate Board and CEO Characteristics on Firm Value: Empirical Evidence from Listed Companies on the Bucharest Stock Exchange," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 51(6), pages 1244-1260, November.
    5. Ahmed Elmashtawy & Mohd Hassan Che Haat & Shahnaz Ismail & Faozi A. Almaqtari, 2023. "Audit committee effectiveness and audit quality: the moderating effect of joint audit," Arab Gulf Journal of Scientific Research, Emerald Group Publishing Limited, vol. 42(3), pages 512-533, May.
    6. Pinghsun Huang & Yi-Chieh Wen & Yan Zhang, 2020. "Does the monitoring effect of Big 4 audit firms really prevail? Evidence from managerial expropriation of cash assets," Review of Quantitative Finance and Accounting, Springer, vol. 55(2), pages 739-768, August.
    7. Watts, Ross L & Zimmerman, Jerold L, 1983. "Agency Problems, Auditing, and the Theory of the Firm: Some Evidence," Journal of Law and Economics, University of Chicago Press, vol. 26(3), pages 613-633, October.
    8. Mangesti Sri & Solimun Solimun, 2019. "The relationship between audit quality and risk taking toward value creation in Indonesia," Journal of Accounting in Emerging Economies, Emerald Group Publishing Limited, vol. 9(2), pages 251-267, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Abdullah, Azrul Bin, 2018. "Company-specific characteristics and the choice of hedge accounting for derivatives reporting: Malaysian case," SocArXiv npa6v, Center for Open Science.
    2. Steve Fortin & Ahmad Hammami & Michel Magnan, 2021. "Re‐exploring Fair Value Accounting and Value Relevance: An Examination of Underlying Securities," Abacus, Accounting Foundation, University of Sydney, vol. 57(2), pages 220-250, June.
    3. Kausar, Asad & Shroff, Nemit & White, Hal, 2016. "Real effects of the audit choice," Journal of Accounting and Economics, Elsevier, vol. 62(1), pages 157-181.
    4. Maroun, Warren & Solomon, Jill, 2014. "Whistle-blowing by external auditors: Seeking legitimacy for the South African Audit Profession?," Accounting forum, Elsevier, vol. 38(2), pages 109-121.
    5. Neupane, Biwesh & Thapa, Chandra & Marshall, Andrew & Neupane, Suman & Shrestha, Chaman, 2024. "Do foreign institutional investors improve board monitoring?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 91(C).
    6. Neeraj Gupta & Jitendra Mahakud, 2020. "CEO characteristics and bank performance: evidence from India," Managerial Auditing Journal, Emerald Group Publishing Limited, vol. 35(8), pages 1057-1093, August.
    7. Andy Lardon & Marc Deloof, 2014. "Financial disclosure by SMEs listed on a semi-regulated market: evidence from the Euronext Free Market," Small Business Economics, Springer, vol. 42(2), pages 361-385, February.
    8. Adam Esplin & Karim Jamal & Shyam Sunder, 2018. "Demand for and Assessment of Audit Quality in Private Companies," Abacus, Accounting Foundation, University of Sydney, vol. 54(3), pages 319-352, September.
    9. Liwei Shan & Albert Tsang & Xiaoxue Zhang, 2024. "Transporting Audit Quality Across Countries: Returnee CEOs and Audit Fees," Journal of Business Ethics, Springer, vol. 192(4), pages 845-874, July.
    10. Sarhan, Ahmed A. & Ntim, Collins G. & Al-Najjar, Basil, 2019. "Antecedents of audit quality in MENA countries: The effect of firm- and country-level governance quality," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 35(C), pages 85-107.
    11. Lopes, Patricia Teixeira & Rodrigues, Lucia Lima, 2007. "Accounting for financial instruments: An analysis of the determinants of disclosure in the Portuguese stock exchange," The International Journal of Accounting, Elsevier, vol. 42(1), pages 25-56.
    12. Persakis, Anthony & Iatridis, George Emmanuel, 2016. "Audit quality, investor protection and earnings management during the financial crisis of 2008: An international perspective," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 41(C), pages 73-101.
    13. Omar Farooque & Wonlop Buachoom & Nam Hoang, 2019. "Interactive effects of executive compensation, firm performance and corporate governance: Evidence from an Asian market," Asia Pacific Journal of Management, Springer, vol. 36(4), pages 1111-1164, December.
    14. Dafydd Mali & Hyoung‐joo Lim, 2021. "Do Relatively More Efficient Firms Demand Additional Audit Effort (Hours)?," Australian Accounting Review, CPA Australia, vol. 31(2), pages 108-127, June.
    15. Ray Ball, 2009. "Market and Political/Regulatory Perspectives on the Recent Accounting Scandals," Journal of Accounting Research, Wiley Blackwell, vol. 47(2), pages 277-323, May.
    16. Arrunada, Benito & Paz-Ares, Candido, 1997. "Mandatory rotation of company auditors: A critical examination," International Review of Law and Economics, Elsevier, vol. 17(1), pages 31-61, March.
    17. Kharuddin, Khairul Ayuni Mohd & Basioudis, Ilias G & Farooque, Omar Al, 2021. "Effects of the Big 4 national and city-level industry expertise on audit quality in the United Kingdom," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 43(C).
    18. Toms, J. S., 2002. "The rise of modern accounting and the fall of the public company: the Lancashire cotton mills 1870-1914," Accounting, Organizations and Society, Elsevier, vol. 27(1-2), pages 61-84.
    19. Ping Yung & Lawrence W C Lai, 2009. "Quality Assurance in Construction by Independent Experts: A Case Study of the Efficiency Performance of State-Owned Enterprises in China," Environment and Planning B, , vol. 36(4), pages 682-697, August.
    20. Cerbone, Dannielle & Maroun, Warren, 2020. "Materiality in an integrated reporting setting: Insights using an institutional logics framework," The British Accounting Review, Elsevier, vol. 52(3).

    More about this item

    Keywords

    Corporate governance; External audit quality; Firm performance; Agency theory; Morocco;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-04803149. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.