Institutional directors, central bank-approved directors, partner-client tenure and audit reporting timeliness

Figures & data

Table 1. Independent variables used in the financial reporting timeliness model

Variable	Definition/Measurement	Sign	Supporting Literature
INSDIR	The total number of nominee directors serving on the boards of institutions as representatives of those institutions’ investors	-	López-Iturriaga et al. (2015), Qasem et al. (2022)
BANKDIR	Number of directors who have been approved by the Central Bank and who serve on the boards of licensed financial institutions	-	See section 2.3
TENURE	= 1 if partner tenure is less than three consecutive years,  = 2 if three to five consecutive years, and  = 3 if more than five consecutive years	-	Wan-Hussin et al. (2018)
LnIAFCOST	The cost of carrying out the internal audit function as expressed as the natural logarithm in 2009.	-	Pizzini et al. (2015), Wan-Hussin and Bamahros (2013)
LnASSET	The total assets expressed as the natural logarithm	-	Sharma et al. (2017)
LnAUDFEE	The amount of audit fees paid to an external audit firm and any linked firms is expressed as the natural logarithm of such fees.	+	Wan-Hussin et al. (2016)
LnNASFEE	The non-audit services fees that were paid to an external audit firm and any related firms in 2009 as expressed by the natural logarithm.	?	Walker and Hay (2013), Wan-Hussin and Bamahros (2015)
RESTATE	1 if the company subsequently restates the financial accounts for 2008 in 2009; otherwise, 0.	+	Harjoto et al. (2015), Bamahros and Wan-Hussin (2016)
SEGMENTp	The number of different product categories	+	Wan-Hussin and Bamahros (2013), Sharma et al. (2017)
LOSS	1 if the firm make loss and 0 otherwise.	+	Harjoto et al. (2015), Sharma et al. (2017)
BIG4	If the auditor is KPMG, PwC, Deloitte or Ernst & Young then the answer is 1, and else the answer is 0.	-	Habib (2015), Sharma et al. (2017)
ACEXP	The percentage of members of the audit committee that have previous auditing experience	-	Sultana et al. (2015), Surbakti et al. (2017)
ACIND	The percentage of non-executive directors that are independent that serve on the audit committee.	-	Bamahros et al. (2022)
ACMEET	One if there are more than four meetings of the audit committee held throughout 2009; otherwise zero.	+	Bamahros and Wan-Hussin (2015a), Surbakti et al. (2017)
ACSIZE	The total number of members on the audit committee	?	Sultana et al. (2015); Bamahros.(2021)
ZSCORE	Indicates Altman’s (1993) Z-score calculated as follows “Z-score = 1.2 (Working capital/Total assets) + 1.4 (Retained earnings/Total assets) + 3.3 (Earnings before interest and taxes/Total assets) + 0.6 (Market value of equity/Book value of liabilities) + 1.0 (Sales/Total assets)”	-	Harjoto et al. (2015).

Table 2. Sample distribution by number of institutional directors, number of financial institution directors and partner-client tenure (n = 431)

PANEL A: Sample distribution by number of institutional directors
Number of Companies	No of Institutional Directors	Average Audit Lag (Days)
372	0	100.69
37	1	80.92
12	2	78.97
10	≥3	79.98
PANEL B: Sample distribution by number of Central Bank-approved directors
Number of Companies	No of Financial Institution Directors	Average Audit Lag (Days)
339	0	100.68
73	1	90.96
15	2	74.93
4	≥3	72.75
PANEL C: Sample distribution of Partner-Client Tenure (years)
Number of Companies	partner-client tenure (years)	Average Audit Lag (Days)
42	1–2	97.87
356	3–5	96.25
33	>5	103.85

Table 3. Descriptive statistics (n = 431)

	Min.	Max.	Mean	Median	Std. Dev.
AUDITLAG (days)	33	127	97.87	107	22.21
INSDIR	0	7	0.23	0	0.72
BANKDIR	0	5	0.27	0	0.60
TENURE	1	3	1.45	1	0.63
IAFCOST (RM000)	3.85	26300	373	82	1500
AUDFEE (RM000)	20	27400	510	166	1593
NASFEE (RM000)	0	6600	103	15	428
RESTATE	0	1	0.33	0	0.47
ASSET(RM000)	31558	71363010	188326	375062	6012207
SEGMENTp	1	8	2.93	3	1.55
LOSS	0	1	0.22	0	0.42
BIG4	0	1	0.65	1	0.48
ACEXP	0	1	0.27	0.33	0.21
ACIND	0.5	1	0.87	1	0.15
ACMEET	0	1	0.64	1	0.48
ACSIZE	3	6	3.26	3	0.52
ZSCORE	−3.69	33.47	2.75	2.06	3.55
VARIANCE	0	1.93	0.03	0	0.13

Refer Appendix for variable measurements.

Table 4. Pearson (Spearman) correlation above (below) diagonal between audit lag, number of institutional directors, number of financial institution directors, partner-client tenure, and control variables (n = 431)

		1	2	3	4	5	6	7	8	9	10	11	12	13	14	15	16	17	18
1	AUDITLAG	1	−.261**	−.251**	0.021	−.288**	−.169**	−.102*	0.09	−.292**	.147**	.176**	−.174**	−0.009	−0.067	.27**	−.124*	−.340**	0.09
2	INSDIR	−.251**	1	.203**	−.036	.380**	.314**	.278**	0.01	.364**	0.079	−.110*	.150**	−.047	−.081	0.057	.301**	0.038	−.032
3	BANKDIR	−.266**	.203**	1	0.018	.433**	.395**	.317**	−.007	.415**	.108*	−.137**	.149**	0.025	0.001	0.003	.130**	.133**	−.043
4	TENURE	0.011	0.012	0.042	1	0.014	−0.023	−0.037	0.05	0.021	.110*	0.012	−.202**	−0.05	0.011	0.016	−0.038	−0.077	0.083
5	LnIAFCOST	−.215**	.271**	.395**	0.038	1	.716**	.468**	0.031	.735**	.237**	−.21**	.26**	−0.021	−0.013	0.044	.23**	0.046	0.012
6	LnAUDFEE	−.136**	.250**	.340**	−0.016	.673**	1	.545**	0.038	.828**	.297**	−.16**	.262**	−0.033	0.022	.14**	.23**	−0.063	0.057
7	LnNASFEE	−0.076	.256**	.256**	−0.005	.407**	.483**	1	−0.003	.463**	.221**	−0.05	.286**	−0.022	−0.032	.13**	.17**	0.042	0.027
8	RESTATE	.102*	−.029	−.051	0.053	0.044	0.063	0.002	1	0.063	0.06	−0.007	0.004	−0.032	−0.063	0.039	0.007	−0.015	0.086
9	LnASSET	−.207**	.294**	.359**	0.038	.686**	.785**	.413**	0.075	1	.25**	−.19**	.288**	−.10*	0.043	0.066	.28**	0.045	−0.013
10	SEGMENTp	.159**	.095*	0.075	.107*	.224**	.260**	.215**	0.059	.229**	1	−0.023	−0.058	−.13**	0.035	.104*	0.008	−.104*	−0.017
11	LOSS	.204**	−.133**	−.130**	0.004	−.215**	−.165**	−0.046	−0.007	−.202**	−0.021	1	−.151**	0	0.032	.166**	−0.077	−.216**	0.058
12	BIG4	−.172**	.145**	.149**	−.158**	.258**	.275**	.286**	0.004	.300**	−0.061	−.15**	1	0.074	−.137**	−0.088	.151**	.170**	−0.023
13	ACEXP	−0.032	−.058	0.008	−0.049	−0.041	−0.045	−0.049	−0.008	−.131**	−.127**	0.011	0.056	1	0.04	−0.026	−0.063	0.049	0.017
14	ACIND	−0.028	−.068	0.001	0.003	0.007	0.052	−0.03	−0.064	0.066	0.046	0.027	−.133**	0.043	1	−0.019	−.13**	0.025	0.044
15	ACMEET	.226**	0.009	0.024	0.009	0.016	.120*	.109*	0.039	0.048	.108*	.166**	−0.088	−0.038	−0.014	1	.116*	−0.086	0.056
16	ACSIZE	−0.069	.235**	.158**	−0.044	.209**	.202**	.145**	−0.002	.250**	0.025	−0.09	.14**	−.14**	−0.069	.119*	1	0.09	0.022
17	ZSCORE	−.355**	.110*	.107*	−0.066	.119*	−0.002	0.028	−0.031	0.02	−.124*	−.40**	.211**	0.061	−0.012	−.16**	0.092	1	−0.079
18	VARIANCE	.255**	−.115*^‡	−.094	0.046	−0.016	0.081	−0.023	.158**	−0.043	0.045	0.029	−0.057	−0.005	0.008	0.059	−0.029	−.142**	1

**Correlation is significant at the 0.01 level (2-tailed).

^†Correlation is significant at the 0.05 level (2-tailed).

Refer Appendix for variable measurement.

Table 5. Regression results on determinants of audit delay for model 1 (main model)

		Coefficients (β)	t-stat	p-value
				(two-tailed)
(Constant)		5.091	32	<0.01
INSDIR	-	−0.056	−1.94	0.05
BANKDR	-	−0.050	−2.21	0.03
TENURE	-	−0.010	−0.61	0.54
LnIAFCOST	-	−0.026	−2.01	0.04
LnAUDFEE	+	0.019	0.91	0.36
LnNASFEE	?	0.005	0.69	0.49
RESTATE	+	0.041	1.75	0.08
LnASSET	-	−0.040	−2.41	0.02
SEGMENTp	+	0.031	4.14	<0.01
LOSS	+	−0.003	−0.12	0.90
BIG4	-	−0.005	−0.18	0.85
ACEXP	_	0.009	0.18	0.86
ACIND	-	−0.112	−1.62	0.11
ACMEET	+	0.135	5.49	<0.01
ACSIZE	-	−0.004	−0.17	0.87
ZSCORE	+	−0.019	−4.63	<0.01
VARIANCE	-	0.086	0.84	0.40
N		431
F-Value		11.75
R^2		0.34

Table 6. Regression results on determinants of audit delay (INSDIR replaced with INSOWN and INSOWN*INSDIR. Added)

		Coefficients	t-stat	p-value
				(two-tailed)
Constant BANKDIR	-	5.0524 −0.04957	31.43 −2.2	<0.01 0.029
INSOWN	-	−0.0036	−0.34	0.732
INSOWN*INSDIR	-	−0.02039	−2.65	0.008
TENURE	-	−0.0099	−0.58	0.57
LnIAFCOST	-	−0.0244	−1.88	0.06
LnAUDFEE	+	0.0209	1.03	0.30
LnNASFEE	?	0.0052	0.73	0.47
RESTATE	+	0.0408	1.75	0.08
LnASSET	-	−0.0378	−2.28	0.02
SEGMENTp	+	0.0308	4.19	<0.01
LOSS	+	−0.0038	−0.17	0.87
BIG4	-	−0.0056	−0.22	0.83
ACEXP	_	0.0110	0.22	0.83
ACIND	-	−0.1180	−1.73	0.09
ACMEET	+	0.1346	5.51	<0.01
ACSIZE	-	−0.0027	−0.1	0.92
ZSCORE	-	−0.0191	−4.66	<0.01
VARIANCE	+	0.0846	0.85	0.39
N		431
F-Value		11.37
R^2		0.35

INSOWN is share ownership by the GLIC. Refer Appendix for the remaining variable measurements.

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