Ownership Structure and Financial Reporting Quality: Influence of Audit Quality Evidence from Jordan

Abstract

The issues of ownership structure, audit quality, earnings management and financial reporting quality have received more consideration from public, profession and other interested parties particularly after persistent firms' scandals. Ownership structure play essential role in improve financial reporting quality (FRQ) through acting as effective internal control. This study examines the influence of the various types of ownership on the FRQ and the influence of audit quality. A stream of literature has examined the relationships between the different types of ownership, audit quality and FRQ. This study aims to connect such of these variables to produce an integrated model describing the influence of ownership structure with in the company and audit quality on FRQ. Therefore, the following relationships are tested: Ownership structure and FRQ, Mediating effect of auditor quality on these relationships, and audit quality and FRQ. Using Panel Data of 180 Jordanian company listed in ASE from 2009-2017, results showed that directors' and family ownership have significantly positive effect on FRQ through reducing earnings management; Institutional ownership has significantly negative influence on FRQ; Managerial ownership has insignificant impact on FRQ. Audit quality has partial mediating impact on these relationships. Audit quality found to has significantly positive impact on FRQ, it implies that audit quality is considered as deterrent to earnings management. This study suggests to increase the supervisory and monitoring role of institutional ownership on the management when preparing financial statements.

The Moderating Effects of Corporate Social Responsibility on the Relationship between Creative Accounting Determinants and Financial Reporting Quality

“…Therefore, the ownership structure theory sufficiently explains the findings concerning the last two hypotheses through identifying the manipulation practices adopted in the banks to avoid a poor performance of the share value and loss of control in the business. Therefore, the relationship between ownership structure and financial reporting quality can be reflected as fewer agency problems and information asymmetry in family organizations, in contrast to non-familial organizations [49,70]. These descriptions verify previous results in the literature which proposed high impacts of ownership structure on providing a faithful representation in the reports presented by commercial banks [71,72].…”

“…All these practices are based on their desire to improve or maintain their financial reporting quality. Furthermore, since stakeholders strongly identify with organizations, the ownership structure fears that a decrease in its corporate reputation can tarnish the organization's name [48,49]. Several researchers have stated that the ownership structure can significantly influence financial reporting quality [50].…”

The Moderating Impact of the Audit Committee on Creative Accounting Determination and Financial Reporting Quality in Iraqi Commercial Banks

“…Other researchers also observed a positive effect of the ownership structure on bank performance (Bao and Lewellyn 2017). Additionally, the ownership structure positively affected the financial reporting quality (Qawqzeh et al 2019). Based on these arguments, the present study hypothesized the following: Hypothesis 1a (H1a).…”

The Impact of the COVID-19 Pandemic on Quality of Financial Reports

“…Alhadab and Clacher [39] also prove that higher-quality auditors constrain accrual and real earnings management practices. Research conducted by Kamolsakulchai [40] and Qawqzeh et al [41] the result for their findings found that the quality of financial reporting was positively influenced by audit quality. Similarly, Patterson et al [42] show that expected audit quality is positively related to financial reporting quality measured by the earnings response coefficient (ERC).…”