The beneficial effect of shareholder participation in general meetings: Evidence in the context of audit quality

Abstract

Purpose -This paper aims to investigate how shareholder participation in general meetings (SPGM) affects audit quality.Design/methodology/approach -We measure SPGM as the percentage of the ownership represented by the shareholders who attend the general meeting. We measure audit quality by auditor industry specialization, audit firm size, and auditor fees. In order to investigate the relationship between SPGM and audit quality, we use a sample of 576 firm-years from Iran's capital market between 2012 and 2018 and employ multivariate regression analysis.Findings -The findings show that, in general, there is an insignificant relationship between SPGM and audit quality. However, we reveal that there is a positive and significant association between the presence of institutional shareholders in general meetings and audit quality. Furthermore, for the companies with a high presence of institutional shareholders in their general meetings, there is a significant and positive relationship between the participation of other shareholders in the general meetings and audit quality. Our findings are robust in regards to a variety of additional tests.Originality/value -Collectively, the findings reveal that the impact of SPGM on audit quality is conditional to the presence of institutional shareholders in general meetings. The findings provide further insights among the mixed evidence on the beneficial effects of SPGM.

Determinants of Audit Quality: The Effect of Ownership Structure and Audit Committee Activities

“…Institutional ownership can implement professional views managerial skills, exercise the right to vote and ask managers to improve company efficiency (Haryono et al, 2017). In addition, many provisions institutions can assist shareholders as a preventive measure if managers negatively influence the audit process and monitor and maintain audit quality (Bazrafshan et al, 2021). According to Guizani and Abdalkrim (2021), researchactive and passive institutional ownership Determinants of Audit Quality: The Effect of ...-Ananda, Sumarta, Satriya, Amidjaya 339 positively affect quality audits.…”