Firm Value Effect of Managerial Ability and External Control Mechanism: Mediation Role of Financial Reporting Quality

Abstract

The aim of this study is to prove that managerial ability and external control as proxied by audit quality are predictors of financial reporting quality which in turn affect firm value. The empirical model of this research is constructed on the basis of Stakeholder Theory and Agency Theory. The population was all companies listed on the Indonesia Stock Exchange (IDX) with a research period of 2017-2019 with a sample of 210 companies each year selected by purposive sampling method. Data analysis was carried out by regression and path analysis. The results prove that managerial ability has a positive and significant influence on the quality of financial reporting. The quality of financial reporting has a positive and significant effect on firm value. Further testing shows that the quality of financial reporting has a mediating role in the relationship between managerial ability and audit quality on firm value.

الدور المُعدل للمنافسة فى سوق المنتج على العلاقة بين القدرة الإدارية وقابلية التقارير المالية للقراءة(باللغة الانجليزية)

“…According to Daromes & Ng (2022), managerial ability has a positive and significant influence on reporting quality in general and higher accuracy in disclosures for legitimation purposes in particular ).…”