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Audit Committee Characteristics and Quality of Financial Information: The Role of the Internal Information Environment and Political Connections

Author

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  • Omid Mehri Namakavarani

    (Department of Accounting, Qazvin Branch, Islamic Azad University, Qazvin 19585, Iran)

  • Abbas Ali Daryaei

    (Accounting Department, Faculty of Social Science, Imam Khomeini International University, Qazvin 34148, Iran)

  • Davood Askarany

    (Business School, Accounting and Finance, the University of Auckland, Auckland 92019, New Zealand)

  • Saeed Askary

    (Department of Accounting and MIS, Gulf University for Science and Technology, Kuwait City 32093, Kuwait)

Abstract

This study explores the relationship between audit committee characteristics and accounting information quality by justifying the role of the internal information environment and political connections under the theocracy state of Iran with syncretic politics. Using panel data of 558 firms from the Tehran Stock Exchange (TSE) for 2011–2016, we rank firms using Technique for Order Preference by Similarity to Ideal Solution (TOPSIS) and entropy method for determination of the weight of evaluating indicators. The firms are positioned into high- to low-level political connections, and two proxies for audit committee characteristics are used: independence of audit committee and financial knowledge. Furthermore, three proxies are used for an internal information environment: earning announcement speed, the accuracy of earning forecasting and lack of financial restatements. Our findings show that there is a significant and positive relationship between the audit committee and financial information quality characteristics in high-level political connections, as well as between financial knowledge and financial information quality. Furthermore, the findings of this study suggest that the application of political economy theories could be appropriate for more inquiry.

Suggested Citation

  • Omid Mehri Namakavarani & Abbas Ali Daryaei & Davood Askarany & Saeed Askary, 2021. "Audit Committee Characteristics and Quality of Financial Information: The Role of the Internal Information Environment and Political Connections," JRFM, MDPI, vol. 14(6), pages 1-18, June.
    • Handle: RePEc:gam:jjrfmx:v:14:y:2021:i:6:p:273-:d:576430
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    Cited by:

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    3. Davood Askarany & Mona Parsaei & Nilofar Ghanbari, 2024. "Business Strategy, Short-Term Debt, and Cost Stickiness," Computational Economics, Springer;Society for Computational Economics, vol. 64(3), pages 1913-1936, September.
    4. Haruna Usman & Tosin Olushola & Amina S. Mohammed, 2022. "Impact of Audit Committee Characteristics on Earning Management of Listed Consumer Goods Companies in Nigeria (2011-2020)," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 6(9), pages 349-358, September.
    5. Azam Pouryousof & Farzaneh Nassirzadeh & Davood Askarany, 2023. "Inconsistency in Managers’ Disclosure Tone: The Signalling Perspective," Risks, MDPI, vol. 11(12), pages 1-14, November.

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