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The Effect of Ownership Structure and Corporate Debt on Audit Quality: Evidence from Jordan

Author

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  • Khaled Abdulwahab Alzeaideen

    (Department of Business Administration, Faculty of Economics and Administrative Sciences, Zarqa Universtiy, Zarqa, Jordan,)

  • Sara Zakaria AL-Rawash

    (Department of Business Administration, Faculty of Economics and Administrative Sciences, Zarqa Universtiy, Zarqa, Jordan.)

Abstract

This study investigates the effect of different ownership structure - (Concentration, Foreign, and Institutional Ownership) - and corporate debt on audit quality of listed companies in Amman Stock Exchange. The research has four hypotheses. To test each hypothesis; a model was defined based on dependent variables employed to measure Audit Quality. The sample study consists of 132 companies from 2005 to 2016. The analysis of logistic regression was used to investigate the relationship between the audit quality measured based on the audit firms size as a dependent variable, ownership structure and corporate debt as independent variables. The results provide evidence of positive statistically significant relationship between the audit quality and that of companies both with foreign and institutional ownership. Also, the results reveal a positive significant relationship between the corporate debt and audit quality. In addition, ownership concentration was shown to have a positive relationship with quality, that relationship was not significant. These results are consistent with prior empirical studies. Also, These results indicate that foreign and institutional investors tend to hire high quality auditors. This study helps academicians, regulators, investors, and auditors to have insight into the nature of ownership structure and is it possible for companies' ownership structures and corporate debt to influence audit quality?

Suggested Citation

  • Khaled Abdulwahab Alzeaideen & Sara Zakaria AL-Rawash, 2018. "The Effect of Ownership Structure and Corporate Debt on Audit Quality: Evidence from Jordan," International Journal of Economics and Financial Issues, Econjournals, vol. 8(3), pages 51-58.
    • Handle: RePEc:eco:journ1:2018-03-7
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    References listed on IDEAS

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    1. Hanwen Chen & Jeff Zeyun Chen & Gerald J. Lobo & Yanyan Wang, 2011. "Effects of Audit Quality on Earnings Management and Cost of Equity Capital: Evidence from China," Contemporary Accounting Research, John Wiley & Sons, vol. 28(3), pages 892-925, September.
    2. Collins, Daniel W. & Rozeff, Michael S. & Dhaliwal, Dan S., 1981. "The economic determinants of the market reaction to proposed mandatory accounting changes in the oil and gas industry: A cross-sectional analysis," Journal of Accounting and Economics, Elsevier, vol. 3(1), pages 37-71, March.
    3. 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.
    4. Monika Causholli & W. Robert Knechel, 2012. "Lending relationships, auditor quality and debt costs," Managerial Auditing Journal, Emerald Group Publishing, vol. 27(6), pages 550-572, June.
    5. Zahra Mohammad Azadi & Esfandyar Mohammadi, 2014. "Investigating the Relationship between Institutional Ownership and Audit Fees," International Journal of Empirical Finance, Research Academy of Social Sciences, vol. 2(1), pages 27-33.
    6. Jamel Azibi & Hubert Tondeur & Mohamed Tahar Rajhi, 2011. "Auditor choice and institutional investor characteristics after the Enron scandal in the French context," International Journal of Economics and Accounting, Inderscience Enterprises Ltd, vol. 2(1), pages 32-52.
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    Cited by:

    1. Hidaya Al Lawati & Zakeya Sanad, 2023. "Ownership Concentration and Audit Actions," Administrative Sciences, MDPI, vol. 13(9), pages 1-24, September.

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    More about this item

    Keywords

    Audit Quality; Corporate Debt; Concentration Ownership; Foreign Ownership; Institutional Ownership.;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing

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