Did corporate governance compliance have an impact on auditor selection and quality? Evidence from FTSE 350

Gerged, Ali Meftah; Mahamat, Babikir Bechir; Elmghaamez, Ibrahim Khalifa

doi:10.1057/s41310-020-00074-1

Cited by 26 publications

(34 citation statements)

References 54 publications

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“…Moreover, and comparable to the findings of prior studies of a similar nature (e.g. Al-Haddad and Whittington, 2019; Fernandes et al , 2019; Giannarakis et al , 2020; Gerged et al , 2020a, b, 2021c; Gerged, 2021), Table 4 shows statistically significant relationships between CED and both CG variables and firm-specific characteristics. For example, in line with our expectations, board size (B.Z.…”

Section: Empirical Analysis and Discussionsupporting

confidence: 88%

“…Prior studies suggest that compliance with good CG arrangements can be positively attributed to increasing firms' dissemination of environmental information (Al-Gamrh et al , 2020; Ezhilarasi and Kabra, 2017; Gerged, 2021; Fernandes et al , 2019; Mathuva et al , 2019). Specific board structures are related to a more dynamic role for CG mechanisms in controlling managers opportunistic behaviour, and thus, bringing into line their interests with those of shareholders (D'Amico et al , 2016; Gerged and Elheddad, 2020; Gerged and Agwili, 2020; Gerged et al , 2020a; Matuszak et al , 2019; Salem et al , 2019). We seek to examine the impact of board characteristics on CED in the Sri Lankan setting.…”

Section: Theoretical Underpinning Related Studies and Hypotheses Developmentmentioning

confidence: 99%

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Determinants of corporate environmental disclosures in Sri Lanka: the role of corporate governance

Nuskiya

Ekanayake

Beddewela

et al. 2021

JAEE

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PurposeThis study explores the levels of and trends in corporate environmental disclosure (CED) among a sample of Sri Lankan listed companies from 2015 to 2019. Furthermore, this article examines the firm-level determinants of CED, including corporate governance (CG) mechanisms, in Sri Lanka from a multi-theoretical perspective.Design/methodology/approachUsing a sample of 205 firm-year observations, this paper distinctively applies a panel quantile regression (PQR) model to examine the determinants of CED in Sri Lanka. This method was supported by estimating a two-step generalized method of moment (GMM) model to tackle any possible existence of endogeneity concerns.FindingsThe authors’ findings indicate an increasing trend in CED practice among the sampled companies (i.e. 41 firms, the only adopters of the GRI framework) in Sri Lanka from 2015 to 2019. However, it is still considered at an early stage compared with other developed counterparts. Furthermore, this study suggests that board size, board independence, board meetings, industry type, profitability and firm size are positively associated with CED level. In contrast, and consistent with our expectation, CEO duality is negatively attributed to the disclosed amount of environmental information in the Sri Lankan context.Research limitations/implicationsThe authors’ empirical evidence reiterates the crucial need to propagate and promote further substantive CG reforms, mandating CED in Sri Lanka.Originality/valueThe authors’ findings provide much-needed insights for indigenous companies, operating across similar emerging economies, to understand how CED can be incorporated into their reporting process based on the GRI framework in order to enhance their firm value, reduce legitimacy gaps and mitigate other operational risks.

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Section: Empirical Analysis and Discussionsupporting

confidence: 88%

Section: Theoretical Underpinning Related Studies and Hypotheses Developmentmentioning

confidence: 99%

Determinants of corporate environmental disclosures in Sri Lanka: the role of corporate governance

Nuskiya

Ekanayake

Beddewela

et al. 2021

JAEE

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“…The choice of the postcrisis period is made to minimise the confounding effects caused by the 2008 financial meltdown. We chose FTSE 350 as it is the largest listed firms by market capitalisation on the London Stock Exchange (LSE) (Gerged, Mahamat, & Elmghaamez, 2020).…”

Section: Methodsmentioning

confidence: 99%

Mandatory disclosure, greenhouse gas emissions and the cost of equity capital: UK evidence of a U‐shaped relationship

2020

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This paper examines the effects of disclosing greenhouse gas (GHG) information mandatorily on the cost of equity capital (COC) using a longitudinal unbalanced panel database of the United Kingdom's FTSE 350 firms for the period 2011–2016. We use a nonlinear panel quantile regression (PQR) model to examine the relationship between GHG disclosure (GHGD) and COC in the United Kingdom. This technique was supplemented by conducting a two‐step generalised method of moment (GMM) estimation to address any concerns related to the potential existence of endogeneity problems. Our findings suggest that high‐level GHGD appeared to be negatively associated with COC up to a certain level, which is known as the turning point; then, any increase in GHGD is likely to increase the COC. This means that the nonlinear association between GHGD and COC is evidenced in our study and takes a U shape. Likewise, our findings are associative of a moderating effect of the 2013 carbon disclosure regulation (CDR) on the GHGD–COC nexus. We argue that mandatory GHGD and GHG risk are linked so that those companies that are associated with higher GHG risk have a tendency to be better disclosers. Consequently, we urge regulators to design GHGD regulations in a way that mirrors corporate environmental risk and leads to a lower COC in order to align the interests of corporations with those of the society at large.

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“…Crucially, these economic turbulences, coupled together with markets uncertainty, can affect investors’ confidence further to firms’ financial performance, and consequently might lead to various financial distresses (KPMG, 2020). The quality of audit process can significantly influence auditors’ ability to detect material misstatements (Lenz and Hahn, 2015) and if a firm does not ensure a top quality of the audit procedure, this is expected to result in reducing shareholders’ confidence in the reported earnings figures, in that way increasing investment risk and the cost of equity capital of a firm (Gerged et al , 2020). Due to the lack of investors’ confidence, earnings also tend to be more volatile and present a decreasing pattern during the economic turbulence period (Kousenidis et al , 2013; Arthur et al , 2015).…”

Section: Introductionmentioning

confidence: 99%

“…Auditors, as such, are facing unprecedented practical challenges in many areas, and many companies may bankrupt or start to manipulate their earnings figures during this exceptional situation. Given the importance of auditing for ensuring the quality of financial statements which enhance investors’ decision-making and integrity of financial markets (Gerged et al , 2020; Tarek et al , 2017; Shahzad et al , 2018), the Financial Reporting Council (FRC) has issued in March 2020 a specific notice related to the impact of the COVID-19 outbreak on audit quality that provides a guide for auditors on the matters that should be considered in relation to the impact of social distancing measures on audit quality (Financial Reporting Council, 2020).…”

Section: Introductionmentioning

confidence: 99%

Auditing in times of social distancing: the effect of COVID-19 on auditing quality

Albitar

Gerged

Kikhia³

et al. 2020

IJAIM

168

184

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Purpose This paper aims to discuss the theoretical impact of COVID-19 social distancing outbreak on audit quality. Design/methodology/approach This paper uses a desk study method to explore the possible impact of COVID-19 crisis on five key considerations for audit quality during the pandemic. These include audit fees, going concern assessment, auditor human capital, audit procedures and audit personnel salaries. Findings As many believe that the COVID-19 outbreak is as yet not a financial crisis, the authors, on the contrary, believe that the effects of the COVID-19 pandemic would be the toughest challenge for auditors and their clients since the 2007–2008 global financial crisis. Specifically, the authors believe that the COVID-19 social distancing can largely affect audit fees, going concern assessment, audit human capital, audit procedures, audit personnel salaries and audit effort, which ultimately can pose a severe impact on audit quality. Practical implications Due to the implementations of work-from-home strategy, audit firms are highly recommended to invest more in digital programs, including artificial intelligence, blockchain, network security and data function development. This can help them to be more adaptable to working from home experience, which is ultimately expected to enhance the effectiveness and the flexibility of communication between auditors and their clients. Also, the authors recommend stock markets and other governmental bodies to provide temporary relaxations in compliance requirements to corporations. This procedure is expected to help firms that apply work-from-home strategy to report better earnings figures, which is appeared to be positively associated with audit quality. Originality/value To date, to the best of the authors’ knowledge, there is no academic study that explores the potential impact of the COVID-19 outbreak on audit quality. This paper, therefore, fills an important research gap in the auditing literature. In addition, this paper can be used as a base to construct a research instrument (e.g. questionnaire or interviews) to provide empirical evidence on the potential impact of COVID-19 on audit quality.

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Did corporate governance compliance have an impact on auditor selection and quality? Evidence from FTSE 350

Cited by 26 publications

References 54 publications

Determinants of corporate environmental disclosures in Sri Lanka: the role of corporate governance

Determinants of corporate environmental disclosures in Sri Lanka: the role of corporate governance

Mandatory disclosure, greenhouse gas emissions and the cost of equity capital: UK evidence of a U‐shaped relationship

Auditing in times of social distancing: the effect of COVID-19 on auditing quality

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