The moderating effect of an audit committee on the relationship between ownership structure and firm performance: Evidence from emerging markets

Figures & data

Table 1. Variables Definition

Variables	Measurement	References
Dependent variables
Return of Assets (ROA)	Measures how efficient management is at utilizing its assets to produce profits. ROA = Profit after Tax/Total Asset	(Alodat et al., 2021; Sami et al., 2011)
Return on Equity (ROE)	Determines how effective shareholders’ funds are utilized to produce returns. ROE = Profit after Tax/Total Equity	(Al-Ahdal & Hashim, 2021; Sami et al., 2011)
Tobin’s Q (TQ)	Tobin’s Q is determined by the proportion of market capitalization plus overall debt divided by aggregate assets of the business entity.	(Al-Ahdal & Hashim, 2021; Alodat et al., 2022)
Independent variables
Managerial Ownership (MO)	Measured as a percentage of shares held by the board of directors.	(Almudehki & Zeitun, 2012; Fauzi & Musallam, 2015).
Ownership Concentration (OC)	Measured as a percentage of shares held by the largest five shareholders.	(Al-Matari et al., 2017; Laporšek et al., 2021)
Family Ownership (FO)	Dummy variable 1 if CEO is from family members and 0 others.	(Andres, 2008; Lam & Lee, 2012)
Control variables
Firm Size (FS)	Natural logarithm of aggregate assets.	(Arora & Sharma, 2016; Ullah, 2017).
Leverage (LEV)	It is determined by overall debt to aggregate assets.	(Abdallah & Ismail, 2017; Hassan et al., 2016).
Audit Types (AT)	Dummy variable 1 if auditing by big 4 and 0 others.	(Al-Matari et al., 2017; Alarussi & Nawafly, 2019)
Countries Dummy (CD)	UAE is designated the value of one (1) while Oman is assigned the value of zero (0).	(Al-Ahdal et al., 2020; Sanan et al., 2019)
Moderator Variable
Audit committee characteristics (ACC)	Is the audit committee linked to CSR/H&S/Sustainability targets? Is there an audit committee within the company? Does the internal audit department have a direct reporting relationship to the audit committee? Is the audit committee made up of at least three members? Is the entire membership of the audit committee composed of non-executive directors? Is the chairperson of the audit committee an independent director? Does the audit committee have at least one member with expertise in financial matters? Does the audit committee hold meetings at least twice a year?	(Al-Ahdal & Hashim, 2021; Salehi et al., 2021)

Table 2. Descriptive Statistics

Variables	Observations			Mean			Maximum			Minimum			Std. Dev.
	Oman	UAE	Overall	Oman	UAE	Overall	Oman	UAE	Overall	Oman	UAE	Overall	Oman	UAE	Overall
ROA	200	200	400	9.97	5.85	7.91	27.32	21.65	27.32	−23.74	−28.86	−28.86	6.45	6.908	6.98
ROE	200	200	400	20.13	12.50	16.31	41.00	47.52	47.52	−22.09	−41.36	−41.36	12.53	13.163	13.38
TQ	200	200	400	1.72	1.54	1.63	8.21	4.13	8.21	0.74	0.43	0.43	0.903	0.761	0.838
MO	200	200	400	59.70	52.66	56.81	45.19	66.28	66.28	8.17	11.21	8.17	24.9	20.2	22.1
OC	200	200	400	44.22	43.22	43.26	93.39	76.12	93.39	36.18	29.09	36.18	17.5	20.1	18.8
FO	200	200	400	0.33	0.466	.400	1.00	1.00	1.00	0.00	0.00	0.00	.472	0.500	0.49
LEV	200	200	400	33.38	30.80	32.09	38.41	26.69	38.41	1.26	1.08	1.08	23.49	23.69	23.58
FSIZE	200	200	450	5.65	4.94	5.30	9.81	6.89	9.81	2.00	2.01	2.00	2.33	1.629	2.04
AT	200	200	400	0.71	0.94	0.82	1	1	1	0	0	0	0.457	0.239	0.38
ACC	200	200	400	0.77	0.80	0.79	1.00	1.00	1.00	0.57	0.43	0.43	0.14	0.11	0.13
CD			400			0.50			1			0			.501

Table 3. Correlation Matrix between Variables

Panel A: Correlation Matrix – Oman
Variables	ROA		ROE		TQ		MO	OC	FO	LEV	FSIZE	AT
ROA	1
ROE	.649**		1
TQ	.426**		.269**		1
MO	.099		.041		.260**		1
OC	.032		−.043		−.250**		.057	1
FO	.539**		.331**		.476**		.272**	−.132	1
LEV	.174*		.456**		.337**		.538**	−.139	.300**	1
FSIZE	.033		.000		.000		.000	.090	.000	.000	1
AT	−.404**		−.320**		−.327**		−.537**	−.078	−.325**	−.601**	−.690**	1
Variance inflation factor							1.035	1.076	1.42	1.039	1.005	1.29
Panel B: Correlation Matrix – UAE
	ROA		ROE		TQ		MO	OC	FO	LEV	FSIZE	AT
ROA	1
ROE	.618**		1
TQ	.107		.010		1
MO	−.147		.032		.137		1
OC	.118		.019		.168*		−.218**	1
FO	−.230**		−.131		−.096		.361**	−.188*	1
LEV	−.134		−.144		.217**		.025	.213**	−.088	1
FSIZE	−.126		−.096		.215**		.255**	.138	−.142	.614**	1
AT	−.321**		−.237**		.271**		.112	−.025	.239**	.315**	.454**	1
Variance inflation factor							1.048	1.81	1.13	1.060	1.052	1.35
Panel C: Correlation Matrix – Collective
	ROA		ROE		TQ		MO	OC	FO	LEV	FSIZE	AT
ROA	1
ROE	.712**		1
TQ	.290**		.169**		1
MO	−.185**		−.063		.055		1
OC	.083		−.001		−.041		−.164**	1
FO	.083		.045		.188**		.291**	−.165**	1
LEV	.030		.157**		.284**		.005	.051	.091	1
FSIZE	.213**		.140*		.243**		.089	.131*	.096	.573**	1
AT	−.127*		−.129*		.098		.140*	−.035	.112	.200**	.300**	1
Variance Inflation Factor								1.019	1.029	1.015	1.23	1.51

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

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

Table 4. Unit Root Test

	Oman		UAE		Overall
	ADF Test		ADF Test		ADF Test
	Zero Level		Zero Level		Zero Level
Variables	t- statistic	P value	t- statistic	P value	t- statistic	P value
ROA	60.6511	0.0000	33.0914	0.0003	55.5177	0.0007
ROE	49.9071	0.0002	43.695	0.0017	68.6524	0.0268
TQ	58.1005	0.0000	67.3017	0.0002	70.7027	0.0181
MO	37.6413	0.0000	52.4383	0.0016	67.3017	0.0343
OC	54.6968	0.0000	75.3432	0.0000	127.472	0.0000
FO	9.25968	0.0000	30.3247	0.0000	30.4657	0.0000
LEV	45.8273	0.0009	58.3176	0.0000	98.7234	0.0000
FSIZE	46.311	0.0007	72.7346	0.000	96.3767	0.0000
AT	13.9811	0.0074	19.0994	0.0008	68.0829	0.0000

Table 5. Model (1) ROA

Variables	Oman	UAE	Overall
C	13.5385***	1.46766***	7.574979**
MO	−6.471644**	0.002195**	−0.075582***
OC	1.429399	0.204955*	1.261479
FO	6.645408**	0.023121	2.317494***
LEV	−0.040902*	0.00005	−0.045317**
FSIZE	0.631449**	−0.132904*	0.932641***
AT	0.667382	−6.682642**	−2.380269**
CD			−2.58802***
R-squared	0.42	0.41	0.174
Adjusted R-squared	0.39	0.31	0.151
F-statistic	15.18	4.29	7.93
Prob(F-statistic)	0.000	0.000	0.000
Breusch-Pagan-Godfrey Test	0.09	0.11	0.06
Serial correlation by Breusch-Godfrey	0.073	0.06	0.08
Hausman test (FE vs. RE)	0.9126	0.7037	Dummy Variable
			REM

Note: ***, **, and * indicate that correlation is significant at the 0.01, 0.05, and 0.10 level (2-tailed).

Table 6. Model (2) ROE

Variables	Oman	UAE	Overall
C	24.470***	1.624538***	16.75817***
MO	−19.47352***	0.000523	−0.011863
OC	6.361251	0.095262*	0.495279
FO	6.923158***	−0.00593	3.798116***
LEV	0.287997***	−0.002075**	0.114755***
FSIZE	−0.478088	0.037346	0.365285
AT	1.049818	−0.028584	−1.519312
CD			−17.86326***
R-squared	0.34	0.32	0.25
Adjusted R-squared	0.31	0.15	0.23
F-statistic	10.65	1.90	12.28
Prob(F-statistic)	0.000	0.007	0.000
Breusch-Pagan-Godfrey Test	0.14	0.13	0.106
Serial correlation by Breusch-Godfrey	0.061	0.086	0.092
Hausman test (FE vs. RE)	0.0432	0.9907	Dummy Variable
			REM

Note: ***, **, and * indicate that correlation is significant at the 0.01, 0.05, and 0.10 level (2-tailed).

Table 7. Model (3) TQ

Variables	Oman	UAE	Overall
C	2.225599***	0.43933***	2.356994***
MO	0.191989	0.006709**	0.006639**
OC	−1.003497**	−0.098397	−0.23922
FO	0.708483***	1.063584**	0.26274**
LEV	0.003786	0.011763**	0.005459**
FSIZE	−0.023601	0.048561	−0.029379
AT	0.038989	0.847455***	0.044807
CD			−0.273388**
R-squared	0.31	0.58	0.19
Adjusted R-squared	0.28	0.51	0.16
F-statistic	9.31	8.62	7.009
Prob(F-statistic)	0.009	0.000	0.000
Breusch-Pagan-Godfrey Test	0.12	0.11	0.08
Serial correlation by Breusch-Godfrey	0.12	0.09	0.13
Hausman test (FE vs. RE)	0.923	0.003	Dummy Variable
			REM

Note: ***, **, and * indicate that correlation is significant at the 0.01, 0.05, and 0.10 level (2-tailed).

Table 8. The Moderating Effect of Audit Committee

Variables	ROA Model			ROE Model			TQ Model
	Oman	UAE	All	Oman	UAE	All	Oman	UAE	All
C	−11.90***	−24.95**	−7.159***	−3.925***	−46.43***	0.99***	−0.47***	−2.046***	0.586**
MO	−12.58***	−0.273**	−0.505***	−4.45**	0.0357*	−0.512	2.071*	0.0234***	0.0178***
ACC	22.51**	47.55**	16.06*	27.52*	86.91**	19.28*	2.669**	3.389*	0.752**
MO*ACC	10.32**	0.319	0.500	20.92*	0.0435*	0.554*	3.178**	−0.0194**	0.0201**
OC	35.25**	50.39***	23.35**	−32.66	102.0**	25.25	−2.769**	−3.621*	−0.00609
OC*ACC	−46.08*	−58.49	−29.96**	−35.97	−123.2*	−36.69	−5.157*	−3.622	−0.177
FO	23.02***	3.559	2.989***	44.40***	−5.141	1.506**	1.287**	−2.287***	0.522***
FO*ACC	−21.69	−6.448	−0.887	−49.88**	3.076	−0.51*	0.688*	−2.519**	1.087**
LEV	0.0932	−0.276*	−0.142**	0.252**	−0.612**	−0.114*	−0.0219	−0.0169*	−0.00482*
LEV*ACC	−0.16	0.298	0.124	0.0633**	0.674*	0.23**	−0.0346	−0.016	−0.039
FSIZE	0.612***	2.192**	1.827**	−1.623	2.44*	0.98*	−0.327*	0.245	0.193
FSIZE*ACC	0.453***	−2.683**	−0.763**	1.91	−3.059*	0.0262	0.426*	−0.196**	−0.212*
AT	6.559**	0.117*	1.977**	7.414	16.82*	0.26**	0.362	3.488**	0.121
AT*ACC	7.1***	9.203**	2.016**	−6.144	−33.68**	−9.751**	0.417**	3.084*	0.188**
R-squared	0.24	0.228	0.187	0.38	0.142	0.183	0.35	0.242	0.137

Note: This table provides panel data analysis for the moderating effect of ACC between MO, OC, FO, LEV, FSIZE, and AT from one side and ROA, ROE, TQ from the other. The regression model for estimating the moderation effect is:

${FinancialPerformance(ROA,ROE,TQ)}_{it}=\alpha +{\beta }_1{MO}_{it}+{\beta }_2{ACC}_{it}+{\beta }_3{OC}_{it}+{\beta }_4{FO}_{it}+{\beta }_5{LEV}_{it}+{\beta }_6{FSIZE}_{it}+{\beta }_7{AT}_{it}+{\beta }_8{(MOxACC)}_{it}+{\beta }_9{(OCxACC)}_{it}+{\beta }_{10}{(FOxACC)}_{it}+{\beta }_{11}{(LEVxACC)}_{it}+{\beta }_{12}{(FSIZExACC)}_{it}+{\beta }_{13}{(ATxACC)}_{it}+{\epsilon }_{it}.$

See Table 1 for variables’ definition. Significance levels are two-tailed p-values: *** p<0.01, ** p<0.05, * p<0.1.

Table 9. Endogeneity Test

Variables	2SLS
	ROA	ROE	TQ
C/C/Lag DV	13.25***	15.62***	0.422***
MO	−0.00453***	0.0903*	0.00803***
OC	2.932	0.836**	−0.821*
FO	2.116***	−2.711	0.370***
LEV	−0.00628**	−0.0438***	0.00614***
FSIZE	3.829***	3.126	−0.422
AT	8.108***	−4.999	1.128*
R-squared	0.149	0.368	0.125

Table 10. Heckman Test

Variables	1^st Step Heckman Test			2^nd Step Heckman Test
	ROA	ROE	TQ	ROA		ROE	TQ
C	3.487***	11.207***	0.820***	5.876***		18.19***	1.196***
$M{O}_{it-1}$	−0.278***	−0.456	0.215**	−0.0751***		−0.00354	0.00134**
$O{C}_{it-1}$	0.698*	−1.325**	−0.879**	1.415*		−1.017**	−0.134**
$F{O}_{it-1}$	1.344***	1.270	0.121***	2.336***		1.944	0.275***
LEV	−0.875**	0.389*	0.456***	−0.0421**		0.0734*	0.00766***
$FSIZ{E}_{it-1}$	1.870***	0.583	0.870	1.017***		0.324	0.0281
AT	−1.451**	−1.579*	0.927**	−2.286**		−3.580*	0.11**
CD				−2.498***		−6.583***	−0.212**
ACC	0.825***	−1.020*	0.421***	1.126***		−1.311	0.270***
Mill’s Lambda	0.413***	0.321***	0.390***	0.214***		0.451***	0.281***
	(0.075)	(0.051)	(0.043)	(0.043)		(0.103)	(0.211)
R-squared	0.231	0.192	0.202	0.282		0.234	0.240

Table 11. Generalized Method of Moments (GMM)

Variables	GMM
	ROA	ROE	TQ
LagDV	0.482***	0.447***	0.542***
MO	−0.0044***	−0.00943	0.00492**
OC	2.715	6.24**	−0.418*
FO	6.017***	15.46*	1.454**
LEV	−0.0276***	0.0138***	−0.00663***
FSIZE	4.657***	4.769*	−0.122
AT	−3.328***	−3.326*	0.036**
AR1	0.24	0.32	0.19
AR2	0.18	0.23	0.11
Sargan test	68.38***	84.22***	79.10***

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