The Effect of Ownership Structure and Audit Quality on Firm Performance
DOI:
https://doi.org/10.11594/ijmaber.02.02.01Keywords:
Ownership structure, Audit quality, Firm performanceAbstract
The study examined the effect of ownership structure and audit qual-ity on firm performance of listed companies in Ghana. The research employed a quantitative research approach; secondary data was ex-tracted from various annual reports and financial statements of the selected companies. The target population was all 42 listed compa-nies on the Ghana Stock Exchange. The sample size was 20 companies selected from all industries. The study period was 2013-2018 re-sulted in 160 firm-yearly empirical observations. The study used re-turn on asset (ROA) and return on equity (ROE) as the performance measure. Ownership structure was measured using managerial own-ership and institutional ownership, audit quality was also measured with the auditor’s reputation, audit committee size and audit commit-tee independence. The control variables used were board size and firm size. The researcher found a weak positive correlation between institutional and managerial ownership and firm performance. More-over, there was a positive effect of audit quality on firm performance. It implies that the engagement of the services of the Big 4 audit firms has an incremental effect on firm performance. Audit committee size posited a positive effect on firm performance whereas audit commit-tee independence was seen to harm firm performance. Similarly, board independence showed a positive effect on ROE and a negative effect on ROA. Board size, however, indicated a positive effect on firm performance. The researcher recommended the pressing need of di-versifying shareholdings in firms as a sweetener to attract more skills and expertise among shareholders that can be tapped to enhance the performance of firms. However, managers should be protected from unnecessary shareholding meddling.
Downloads
References
Akotey, J.O., Sackey, F.G., Amoah, L., and Manso, R.F. (2013). The financial performance of life insurance companies in Ghana. Journal of Risk Finance, 14(3), 286-302.
Almajali, A. Y., Alamro, S. A., and Al-Soub, Y. Z. (2012). Factors affecting the financial performance of Jordanian insurance companies listed at Amman Stock Exchange. Journal of Management research, 4(2), 266.
Al-matari, E. M., Al-matari, Y. A. and Saif, S. A. (2017) ‘Association Between Ownership Structure Characteristics And Firm Performance ’:, 21(1), pp. 1–10.
Douma, S., George, R., and Kabir, R. (2006). Foreign and domestic ownership, business groups, and firm performance: Evidence from a large emerging market. Strategic Management Journal, 27(7), 637-657.
Elewa, M. M. (2019). The effect of audit quality on firm performance: A panel data approach. International Journal of Accounting and Financial Reporting, 9(1), 2162-3082
Gelman, A. (2010). Analysis of variance- why it is more important than ever. The Annals of Statistics Vol 33, No. 1 pp. 1-53.
Greene, W. H. (2008). Econometrics Analysis, 6th Edition, Upper saddle River, N.J: Prentice Hall
Hsiao, C. (1986). Analysis of panel data, vol. 11 of econometric society monographs. New York: Cambridge University Press.
Jiang, H., Habib, A., and Hu, B. (2011). Ownership concentration, voluntary disclosures and information asymmetry in New Zealand. The British Accounting Review, 43(1), 39-53.
Kim, B. (2011). Do foreign investors encourage value-enhancing corporate risk taking? Emerging Markets Finance and Trade, 47(3), 88-110.
Krivogorsky, V. (2006). Ownership, board structure, and performance in continental Europe. The International Journal of Accounting, 41: 176-197.
Matoke, N. V., and Omwenga, J. (2016). Audit quality and financial performance of companies listed in Nairobi securities exchange. International Journal of Scientific and Research Publications, 6(11), 2250-3153.
Oluwagbemiga, A. (2010). The Role of Auditors in Fraud Detection, Prevention and Reporting in Nigeria.
Ongore, V. O. (2011) ‘The relationship between ownership structure and firm performance : An empirical analysis of listed companies in Kenya’, 5(6), pp. 2120–2128.
Sayrs, L. (1989). Pooled Time Series Analysis. New Bury Park, Ca:Sage, pp.10,32
Shleifer, A. and Vishny, R.W. (1986) ‘Large shareholders and corporate control’, Journal of Political Economy, 94: 461−488.
Tsegba I. N., and Ezi-Herbert, W. (2011). The relationship between ownership structure and firm performance: Evidence from Nigeria. African Journal of Accounting Economics, Finance and Banking Research, 7(7).
Pedersen, T., and Thomsen, S. (1999). Economic and systemic explanations of ownership concentration among Europe's largest companies. International Journal of the Economics of Business, 6(3), 367-381.
Singh, M., and Davidson III, W. N. (2003). Agency costs, ownership structure and corporate governance mechanisms. Journal of Banking & Finance, 27(5), 793-816.
Thomsen, S., and Pedersen, T. (2000). Ownership structure and economic performance in the largest European companies. Strategic Management Journal, 21(6), 689-705.
Tobi, B. A., Osasrere, A. O., and Emmanuel, U. (2016). Auditor’s Independence and Audit Quality: A Study of Selected Deposit Money Banks in Nigeria. International Journal of Finance and Accounting, 5(1), 13-21.
Downloads
Published
Issue
Section
License
Copyright (c) 2021 Dramani Angsoyiri
This work is licensed under a Creative Commons Attribution 4.0 International License.
Authors who publish with this journal agree to the following terms:
Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See the Effect of Open Access).
