Do Individual Auditors from More Religious Hometowns Enhance Audit Quality? Evidence from an Islamic Country

Ocak, Murat; Kurtulmuş, Bekir Emre; Arioglu, Emrah

doi:10.1007/s10551-023-05374-4

Cited by 2 publications

(7 citation statements)

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“…Because the culture and its sub-components of a given area could also influence the economic decisions made by organizations that individuals are a part of, considering that it is humans who make essential corporate decisions, not companies as mere entities (Hilary and Hui, 2009). Studies on the importance of individuals’ hometown in recent literature typically focus on individual auditors (Ocak et al , 2023; Tong et al , 2022; Xiong et al , 2020; Deng et al , 2024) or CEOs (Kuo et al , 2023; Zhu et al , 2022).…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

“…A hometown is defined as a place where individuals spend most of their childhood and plays an important role in shaping an individual’s identity, cognitions, behaviors and decisions (Ocak et al , 2023). Numerous studies provide arguments and empirical evidence suggesting that values gained in the early stages of life tend to be fairly stable.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

“…Specifically, the level of religiosity may be different in the region where decision-makers, such as executives, were born and raised. Most recent studies regarding the early life experiences of individuals (Tong et al , 2022; Xiong et al , 2020; Ocak et al , 2023; Kuo et al , 2023; Fang et al , 2023) demonstrate that not only the religiosity level of the region in which companies operate, but also the religiosity level of the regions where decision-makers such as CEOs and individual auditors were born and raised can be effective in company outputs. In this paper, we investigate the impact of the religiosity level of the chairperson’s hometown on the quality of financial reporting, controlling for the religiosity level of the company’s location and a set of other factors.…”

Section: Introductionmentioning

confidence: 99%

“…However, recent papers do not consider where the executives are from and the religiosity levels of chairpersons’ hometowns. Most recent studies highlight the importance of early-life experience of individuals (CEOs or individual auditors) on financial reporting quality or audit quality (Tong et al , 2022; Ocak et al , 2023; Deng et al , 2024; Xiong et al , 2020). To the best of the authors’ knowledge, the current study is among the first studies to consider the significance of chairpersons’ hometown religiosity on financial reporting quality and presents unique findings that chairpersons from more religious hometowns encourage higher-quality financial reporting.…”

Section: Introductionmentioning

confidence: 99%

“…Because the number of mosques per capita, the number of Quran courses per capita and the number of Quran course students per capita could be considered more reliable than databases such as WVS. Province-level observations from the WVS survey may not be sufficient to accurately represent the religiosity level of provinces due to inadequate observations in some provinces in Turkey (Ocak et al , 2023). The variables of interest in this paper provide new insights to measure the religiosity level of a given area.…”

Section: Introductionmentioning

confidence: 99%

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Hometown religiosity and financial reporting quality: evidence from chairpersons

Arioglu,

Borak,

Ocak

2024

MAJ

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Purpose This study aims to investigate whether there is a relationship between the religiosity levels of chairpersons’ hometowns and the financial reporting quality of companies. Design/methodology/approach Using a unique hand-collected data set obtained from various sources, the authors use ordinary least squares and logistic regressions to test the hypotheses and further implement various methods to address potential issues such as omitted variables, reverse causality and selection bias problems. In addition, the authors control for the religiosity level of chief executive officers’ (CEOs) hometowns. Finally, the authors divide the sample into two subsamples – companies with strong corporate governance and companies with weak corporate governance – to investigate the effect of chairpersons’ hometown religiosity on financial reporting quality under strong or weak corporate governance. Findings The findings demonstrate that companies with chairpersons from religious hometowns produce high-quality financial reports. Additional tests, such as the Heckman selection model and instrument variable regression, confirm the robustness of the main results. Controlling for the religiosity level of the CEO’s hometown yields consistent findings with the main results. Finally, additional results indicate that the religiosity levels of chairpersons’ hometowns play a significant role in enhancing financial reporting quality in companies with weak corporate governance. Practical implications Companies should consider appointing board members or chairpersons from more religious hometowns, as the empirical results of this study support the positive effects of chairpersons’ hometown religiosity on financial reporting quality. Originality/value To the best of the authors’ knowledge, the current study is among the first to demonstrate the relationship between the religiosity level of the chairpersons’ hometown and the financial reporting quality of companies. The study introduces unique hometown religiosity proxies and controls for various variables related to corporate governance, chairperson attributes, company characteristics, and audit firm characteristics.

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