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Direct and Mediated Associations among Audit Quality, Earnings Quality, and Share Price: The Case of Jordan

Author

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  • Malik Abu Afifa
  • Fares Alsufy
  • Ahmad Abdallah

Abstract

Purpose: The current study aims to investigate the relationship between audit quality and the share price in Jordan as a developing market. Moreover, it also uses the role of earnings quality as a mediator factor in the study model. Design/Approach/Methodology: The study sample is comprised of all Jordanian industrial public shareholding companies listed in Amman Stock Exchange during the years 2010 to 2018. Therefore, this study uses a panel data analysis on financial disclosures. Findings: The study concluded that a high audit quality and a high earnings quality separately increase the share price. The earnings quality partially mediates the relationship between audit quality and the share price. It was also found that a high audit quality does not improve earnings quality of the targeted companies. Practical Implication: The findings can be used in efforts to: (i) identify the level of Jordanian market control over audit quality and earnings quality with evidence; (ii) provide more explanations on the importance of audit quality and quality of financial information in the biasness environment; (iii) the results of the this study will be more important for the investors, management, decisions makers, policy makers, and other interested parties; (iv) the findings of the study help the policy makers to adopt good regulations to improve the transparency in reporting the financial information that affects the share price. Originality/Value: The study is an original study and it adds to scholarly debate on effect of audit quality and earnings quality on the share price in Jordan as a developing market. It also uses the role of earnings quality as a mediator factor in the relationship between audit quality and the share price.

Suggested Citation

  • Malik Abu Afifa & Fares Alsufy & Ahmad Abdallah, 2020. "Direct and Mediated Associations among Audit Quality, Earnings Quality, and Share Price: The Case of Jordan," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(3), pages 500-516.
    • Handle: RePEc:ers:ijebaa:v:viii:y:2020:i:3:p:500-516
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    References listed on IDEAS

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    Cited by:

    1. Malik Abu Afifa & Isam Saleh & Fadi Haniah, 2021. "Direct and Mediated Associations Among Ownership Structure, Cash Holdings and Firm Value: The Case of Jordanian Insurance Firms," Vision, , vol. 25(4), pages 471-482, December.
    2. Sabo Mohammed & Junaidu Muhammad Kurawa, 2021. "Board Attributes and Value of Listed Insurance Companies in Nigeria: The Mediating effect of Earnings Quality," International Journal of Management Science and Business Administration, Inovatus Services Ltd., vol. 8(1), pages 7-23, November.

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    More about this item

    Keywords

    Earnings management; earnings quality; audit quality; share price.;
    All these keywords.

    JEL classification:

    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative

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