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Corporate Governance and Auditor Quality Choice: Evidence from Palestinian Corporations

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  • Aladdin Dwekat

    (Department of Accounting, An-Najah National University, Nablus, Palestine,)

  • Zeena Mardawi

    (Department of Accounting, An-Najah National University, Nablus, Palestine,)

  • Islam Abdeljawad

    (Department of Finance and Banking, An-Najah National University, Nablus, Palestine.)

Abstract

The aim of this study is to examine the impact of corporate governance mechanisms on auditor quality choice in Palestine. The relationship between corporate governance and auditor quality choice depends on whether Palestinian firms see the quality of auditor as a substitute or a complement to governance practices. The sample included 46 firms listed on the Palestine Stock Exchange (PSE) for the period from 2013 to 2015. Relevant data were collected from the annual reports of the sampled companies published at the PSE website. Auditor's quality was assessed using audit firm size (Big 4 or non-Big 4). To achieve the objectives of this study, a binary logistic regression was used. The results revealed that companies with a high ownership concentration, larger board size and the existence of audit committee tend to hire a high quality auditor. In addition, results showed a significant positive tendency of higher total asset firms to hire a quality auditor while firms with higher leverage tend to choose less quality auditors. Furthermore, director ownership, board independence, CEO duality were found to have no effect on auditor's quality choice. The study recommends that regulators need to encourage companies for more compliance with corporate governance instructions.

Suggested Citation

  • Aladdin Dwekat & Zeena Mardawi & Islam Abdeljawad, 2018. "Corporate Governance and Auditor Quality Choice: Evidence from Palestinian Corporations," International Journal of Economics and Financial Issues, Econjournals, vol. 8(2), pages 47-53.
    • Handle: RePEc:eco:journ1:2018-02-7
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    References listed on IDEAS

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    1. Craswell, Allen T. & Francis, Jere R. & Taylor, Stephen L., 1995. "Auditor brand name reputations and industry specializations," Journal of Accounting and Economics, Elsevier, vol. 20(3), pages 297-322, December.
    2. Géraldine Broye & Laurent Weill, 2008. "Does leverage influence auditor choice? A cross-country analysis," ULB Institutional Repository 2013/14152, ULB -- Universite Libre de Bruxelles.
    3. DeAngelo, Linda Elizabeth, 1981. "Auditor size and audit quality," Journal of Accounting and Economics, Elsevier, vol. 3(3), pages 183-199, December.
    4. Paul Collier & Alan Gregory, 1996. "Audit committee effectiveness and the audit fee," European Accounting Review, Taylor & Francis Journals, vol. 5(2), pages 177-198.
    5. Mark T. Bradshaw & Scott A. Richardson & Richard G. Sloan, 2001. "Do Analysts and Auditors Use Information in Accruals?," Journal of Accounting Research, Wiley Blackwell, vol. 39(1), pages 45-74, June.
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    Cited by:

    1. Vanessa Carvalho Pereira & Antonio Gualberto Pereira & José Sérgio Casé Oliveira, 2023. "Influence of ownership structure on the choice of Big Four independent auditors," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 20(3), pages 316-326, September.
    2. 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.
    3. Soumaya Ayedi & Azhaar Lajmi & Emna Boumediene, 2019. "The effects of agency conflicts on audit quality demand: Evidence from Tunisia," Economics Bulletin, AccessEcon, vol. 39(3), pages 2175-2183.

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    More about this item

    Keywords

    Corporate Governance; Auditor Choice; Palestine;
    All these keywords.

    JEL classification:

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

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