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Firm Performance: An Analysis of Financial Policy and Audit Quality in Pakistan

Author

Listed:
  • Kamran, Muhammad Rizwan
  • Shami, Mugeeb Zaman
  • Khan, Aiza
  • Hussain, Muqdas Muhammad

Abstract

Purpose: Having effective and well-structured financial policies is essential for a company's success. These policies provide the foundation for measuring and analyzing an organization's performance through a robust financial management system. This study introduces a novel element, namely, audit quality, to enhance our understanding of how financial policies impact a firm's performance. The primary objective of this research is to delve deeper into whether audit quality plays a moderating role in the relationship between financial policies and a firm's performance.Design/Methodology/Approach: Discretionary accruals were calculated using a regression model, and descriptive analysis was employed to analyze the data.Findings: The results of the study reveal that the connection between free cash flow, agency costs, and a firm's performance is significantly influenced by audit quality. &This research particularly offers valuable insights into the manufacturing sector, where performance is of paramount importance.Implications: By considering the interplay of financial policy, audit quality, and firm performance, businesses and policymakers can make more informed decisions that contribute to the overall prosperity of the Pakistani corporate sector.

Suggested Citation

  • Kamran, Muhammad Rizwan & Shami, Mugeeb Zaman & Khan, Aiza & Hussain, Muqdas Muhammad, 2023. "Firm Performance: An Analysis of Financial Policy and Audit Quality in Pakistan," Journal of Accounting and Finance in Emerging Economies, CSRC Publishing, Center for Sustainability Research and Consultancy Pakistan, vol. 9(4), pages 479-488, December.
    • Handle: RePEc:src:jafeec:v:9:y:2023:i:4:p:479-488
    DOI: http://doi.org/10.26710/jafee.v9i4.2792
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