Corporate governance, audit quality and firm performance – an empirical evidence

Figures & data

Table 1. Variables used in the model.

Variables	Abbre	Calculation	Previous studies
Dependent variable
Return on total assets	ROA	$\frac{\text{Profit after tax}}{\text{Total assets}}\mathit{ *}100$	Detthamrong et al. (2017), Ciftci et al. (2019), Al-Ahdal et al. (2020)
Return on total equity	ROE	$\frac{\text{Profit after tax}}{\mathrm{\text{Equity}}}\mathrm{ }*100$	Detthamrong et al. (2017), Ciftci et al. (2019), Al-Ahdal et al. (2020)
Return on total sales	ROS	$\frac{\text{Operating Profit}}{\text{Sales}}$	Detthamrong et al. (2017), Ciftci et al. (2019), Al-Ahdal et al. (2020), Al-Ahdal & Hashim (2022)
Independent variable
Board of directors’ size	BOARD1	$\frac{\text{Number of members}}{11}$	Xu et al. (2022), Siddiqui et al. (2023), Zhou et al. (2018)
Percentage of women on the board	BOARD2	$\frac{\text{Number of women members}}{\text{Board size}}$	Xu et al. (2022), Siddiqui et al. (2023), Zhou et al. (2018)
Gender of the Chairman of the Board of Directors	BOARD3	Get the value 1 if the chairman is male, and 0 if female	Xu et al. (2022), Siddiqui et al. (2023), Zhou et al. (2018)
Director’s gender	BOARD4	Get the value 1 if the director is male, and 0 if female	Xu et al. (2022), Siddiqui et al. (2023), Zhou et al. (2018), Boachie & Mensah (2022)
Audit repulation	AUDIT	Get a value of 1 if the auditing firm is Big 4 and zero if it is not	Alsmady (2022), Al-Ahdal & Hashim (2022), Khader (2023)
Financial reporting quality	FRQ	$\Delta {\mathrm{\text{AR}}}_{\mathrm{i},\mathrm{t}}={\mathrm{\beta }}_0+{\mathrm{\beta }}_1\Delta {\mathrm{\text{Sales}}}_{\mathrm{i},\mathrm{t}}+{\mathrm{ϵ}}_{\mathrm{i},\mathrm{t}}$	McNichols & Stubben (2008)
Age	AGE	Year of calculation - Year of establishment	Mallinguh et al. (2020)
Leverage	Leverage	$\frac{\text{Total debt}}{\text{Total assets}}$	Detthamrong et al. (2017)
Short-term debt ratio	Short	$\frac{\mathrm{\text{Short}}-\text{term debt}}{\text{Total assets}}$	Nazir et al. (2021)
Firm size	Size	The natural logarithm of total assets	Nguyen (2020)
Liquidity	Liquidity	$\frac{\mathrm{\text{Short}}-\text{term assets}}{\mathrm{\text{Short}}-\text{term liabilities}}$	Samo & Murad (2019)
Ratio of tangible assets	Tangible	$\frac{\text{Tangible assets}}{\text{Total assets}}$	Nguyen & Huynh (2023)
Ratio of intangible assets	Intangible	$\frac{\text{Intangible assets}}{\text{Total assets}}$	Nguyen & Huynh (2023)

Source: Authors’ compilation.

Table 2. Descriptive statistics.

Variable	Obs	Mean	Std. Dev	Min	Max
ROA	381	0.045	0.088	−0.635	0.688
ROE	379	0.101	0.198	−0.628	2.585
ROS	381	0.239	2.703	−3.891	1.000
BOARD1	385	0.545	0.164	0.273	1.000
BOARD2	341	0.141	0.149	0.000	0.667
BOARD3	397	0.907	0.291	0.000	1.000
BOARD4	397	0.899	0.301	0.000	1.000
AUDIT	390	0.126	0.332	0.000	1.000
Age	397	20.441	11.213	4.000	51.000
Leverage	381	0.493	0.222	0.003	1.000
Short	380	0.428	0.217	0.003	1.000
Size	381	5.691	0.774	4.200	7.758
Liquidity	381	3.062	6.276	0.034	55.192
Tangible	379	0.107	0.116	0.000	0.710
Intangible	381	0.018	0.032	0.000	0.347

Source: Authors’ calculation.

Table 3. Correlation matrix.

	BOARD1	BOARD2	BOARD3	BOARD4	AUDIT	leverage	short	size	liquidity	Tangible	Intangible	Age
BOARD1	1.000
BOARD2	−0.195	1.000
BOARD3	−0.074	−0.162	1.000
BOARD4	−0.019	−0.079	−0.013	1.000
AUDIT	0.184	0.107	−0.379	−0.030	1.000
Leverage	0.054	−0.086	0.062	−0.053	−0.049	1.000
Short	−0.011	−0.141	0.022	−0.111	−0.006	0.822	1.000
Size	0.298	−0.045	−0.076	0.057	0.362	0.388	0.166	1.000
Liquidity	−0.023	0.127	0.059	−0.069	−0.093	−0.492	−0.473	−0.249	1.000
Tangible	0.173	0.038	−0.433	0.001	0.431	−0.053	−0.117	0.212	−0.144	1.000
Intangible	0.224	−0.127	−0.123	−0.105	0.078	0.021	0.024	0.084	−0.045	0.205	1.000
Age	0.003	0.011	0.068	−0.094	0.016	0.128	0.071	0.310	0.024	−0.019	0.062	1.000

Source: Authors’ calculation.

Table 4. Multicollinearity test of VIF.

	VIF	1/VIF	VIF	1/VIF	VIF	1/VIF
Variable	ROA		ROE		ROS
leverage	4.32	0.232	5.73	0.175	4.32	0.232
short	3.80	0.263	4.75	0.211	3.80	0.263
size	1.98	0.504	2.19	0.457	1.98	0.504
AUDIT	1.64	0.611	1.72	0.582	1.64	0.611
tangible	1.58	0.633	1.61	0.621	1.58	0.633
liquidity	1.57	0.638	1.59	0.629	1.57	0.638
BOARD3	1.42	0.706	1.42	0.702	1.42	0.706
BOARD1	1.22	0.823	1.22	0.821	1.22	0.823
age	1.21	0.824	1.21	0.825	1.21	0.824
BOARD2	1.17	0.852	1.20	0.832	1.17	0.852
intangible	1.12	0.894	1.13	0.886	1.12	0.894
BOARD4	1.09	0.917	1.09	0.913	1.09	0.917
FRQ	1.04	0.959	1.04	0.958	1.04	0.959
Mean VIF	1.78		1.99		1.78

Source: Authors’ calculation.

Table 5. Cross- sectional dependence test.

Variable	CD-test	p-value
FRQ	3.49	0.000
ROA	−0.37	0.710
ROS	−0.94	0.345
Age	87.62	0.000
Leverage	0.73	0.467
Short	0.34	0.730
Size	18.79	0.000
Liquidity	1.42	0.157

Source: Authors’ analysis.

Table 6. Endogeneity test based on Wu-Hausman test.

No	Variable	F-statistic	P-value	F-statistic	P-value	F-statistic	P-value
		ROA		ROE		ROS
1	FRQ	3.305	0.070	2.611	0.107	1.149	0.285
2	BOARD1	0.753	0.386	0.175	0.676	0.898	0.344
3	BOARD2	1.223	0.270	1.101	0.295	2.132	0.045
4	BOARD3	0.142	0.706	0.068	0.794	0.001	0.972
5	BOARD4	0.325	0.569	0.679	0.411	0.734	0.392
6	AUDIT	0.304	0.582	0.174	0.677	0.033	0.856
7	Leverage	6.614	0.011	9.079	0.003	0.049	0.826
8	Short	15.793	0.000	11.010	0.001	0.024	0.876
9	Size	6.087	0.014	6.353	0.012	0.336	0.563
10	Liquidity	7.650	0.006	2.181	0.141	0.151	0.698
11	Tangible	0.001	0.976	0.088	0.767	0.018	0.894
12	Intangible	0.838	0.361	0.843	0.359	0.011	0.916

Source: Authors’ analysis.

Table 7. Regression results.

Variable	OLS	FEM	REM	FGLS	Driscoll - Kraay	IV-GMM
FRQ	−0.007 (0.181)	−0.003 (0.468)	−0.004 (0.364)	−0.007 (0.170)	−0.007 (0.103)	0.067 (0.200)
BOARD1	−0.086** (0.012)	−0.007 (0.867)	−0.046 (0.214)	−0.086*** (0.010)	−0.086* (0.054)	−0.086* (0.072)
BOARD2	0.044 (0.163)	0.076 (0.204)	0.059 (0.131)	0.044 (0.152)	0.044** (0.025)	0.039 (0.382)
BOARD3	−0.033 (0.131)	−0.012 (0.695)	−0.023 (0.350)	−0.033 (0.121)	−0.033 (0.090)	−0.050 (0.183)
BOARD4	0.003 (0.853)	−0.031 (0.312)	−0.013 (0.578)	0.003 (0.849)	0.003 (0.812)	0.022 (0.422)
AUDIT	0.026 (0.100)	−0.008 (0.750)	0.009 (0.635)	0.026* (0.091)	0.026** (0.016)	0.035 (0.155)
Leverage	−0.106*** (0.008)	−0.179*** (0.001)	−0.143*** (0.001)	−0.106*** (0.006)	−0.106** (0.039)	−0.089 (0.344)
Short	0.067* (0.089)	0.010 (0.862)	0.062 (0.164)	0.067* (0.081)	0.067** (0.026)	0.121 (0.187)
Size	0.019** (0.013)	0.057* (0.057)	0.025** (0.017)	0.019* (0.011)	0.019*** (0.002)	0.012 (0.360)
Liquidity	0.000 (0.944)	−0.002 (0.104)	−0.001 (0.497)	0.000 (0.943)	0.000 (0.972)	0.001 (0.492)
Tangible	0.032 (0.516)	0.026 (0.802)	0.033 (0.602)	0.032 (0.505)	0.032 (0.573)	0.054 (0.485)
Intangible	0.094 (0.535)	0.096 (0.602)	0.092 (0.574)	0.094 (0.525)	0.094 (0.173)	0.053 (0.803)
Age	−0.001* (0.076)	−0.000 (0.9700	−0.001 (0.225)	−0.001* (0.068)	−0.001** (0.048)	−0.001* (0.088)
_cons	0.036 (0.472)	−0.163 (0.313)	0.008 (0.907)	0.036 (0.461)	0.036 (0.229)	0.053 (0.556)
F test	F(38, 255) = 3.07 Prob > F = 0.000
Hausman test		Chi2(13) = 21.58 Prob > chi2 = 0.062
Breusch and Pagan Lagrangian multiplier test for random effects			chibar2(01) = 30.64 Prob > chibar2 = 0.000
Wooldridge test for autocorrelation			F(1, 37) = 0.036 Prob > F = 0.851

Dependent variable ROA.

Source: Authors’ analysis.

Table 8. Regression results for robustness test.

Variable	ROA		ROE		ROS
	FGLS	Driscoll - Kraay	FGLS	Driscoll - Kraay	FGLS	Driscoll – Kraay
FRQ	−0.006 (0.164)	−0.006 (0.122)	−0.011 (0.184)	−0.011 (0.065)	−0.008 (0.350)	−0.008 (0.081)
BOARD1	−0.084 (0.011)	−0.084 (0.054)	−0.153 (0.012)	−0.153 (0.045)	−0.169 (0.004)	−0.169 (0.000)
BOARD2	0.044 (0.155)	0.044 (0.028)	0.093 (0.103)	0.093 (0.011)	0.040 (0.453)	0.040 (0.210)
BOARD3	−0.030 (0.150)	−0.030 (0.123)	−0.042 (0.269)	−0.042 (0.267)	−0.022 (0.540)	−0.022 (0.213)
BOARD4	0.003 (0.866)	0.003 (0.836)	0.055 (0.093)	0.055 (0.121)	0.074 (0.024)	0.074 (0.128)
AUDIT	0.024 (0.121)	0.024 (0.040)	0.029 (0.302)	0.029 (0.205)	−0.046 (0.084)	−0.046 (0.016)
Leverage	−0.111 (0.004)	−0.111 (0.030)	−0.186 (0.025)	−0.186 (0.006)	−0.128 (0.063)	−0.128 (0.044)
Short	0.069 (0.067)	0.069 (0.017)	0.241 (0.003)	0.241 (0.000)	0.051 (0.446)	0.051 (0.377)
Size	0.019 (0.009)	0.019 (0.001)	0.049 (0.001)	0.049 (0.000)	0.072 (0.000)	0.072 (0.003)
Liquidity	0.001 (0.935)	0.001 (0.968)	0.001 (0.614)	0.001 (0.665)	0.006 (0.000)	0.006 (0.000)
Tangible	0.043 (0.380)	0.043 (0.463)	0.168 (0.061)	0.168 (0.173)	0.117 (0.173)	0.117 (0.094)
Intangible	0.095 (0.519)	0.095 (0.141)	0.021 (0.936)	0.021 (0.899)	0.062 (0.811)	0.062 (0.585)
Age	−0.001 (0.053)	−0.001 (0.073)	−0.001 (0.191)	−0.001 (0.193)	−0.001 (0.056)	−0.001 (0.047)
GDP	1.269 (0.097)	1.269 (0.034)	2.453 (0.081)	2.453 (0.047)	0.408 (0.765)	0.408 (0.682)
INF	−2.661 (0.108)	−2.661 (0.029)	−5.173 (0.088)	−5.173 (0.040)	−0.860 (0.771)	−0.860 (0.673)
_cons	1.438 (0.149)	1.438 (0.020)	2.644 (0.148)	2.644 (0.038)	0.197 (0.911)	0.197 (0.854)

Source: Authors’ analysis.

Table 9. Regression results.

Variable	OLS	FEM	REM	FGLS	Driscoll - Kraay	IV-GMM
FRQ	−0.012 (0.197)	−0.006 (0.512)	−0.008 (0.360)	−0.012 (0.185)	−0.012 (0.043)	−0.011 (0.209)
BOARD1	−0.156** (0.013)	−0.024 (0.763)	−0.098 (0.153)	−0.156** (0.011)	−0.156** (0.044)	−0.143** (0.019)
BOARD2	0.094 (0.108)	0.076 (0.499)	0.103 (0.148)	0.094* (0.099)	0.094*** (0.007)	0.102* (0.085)
BOARD3	−0.047 (0.237)	0.013 (0.822)	−0.018 (0.679)	−0.047 (0.226)	−0.047 (0.216)	−0.035 (0.366)
BOARD4	0.056* (0.098)	−0.046 (0.426)	0.018 (0.668)	0.056* (0.089)	0.056 (0.115)	0.066** (0.048)
AUDIT	0.032 (0.270)	−0.008 (0.970)	0.015 (0.655)	0.032 (0.258)	0.032 (0.138)	0.040 (0.193)
Leverage	−0.184** (0.032)	−0.412*** (0.002)	−0.259*** (0.009)	−0.184** (0.028)	−0.184*** (0.007)	−0.115 (0.329)
Short	0.244*** (0.003)	0.203 (0.134)	0.254*** (0.008)	0.244*** (0.002)	0.244*** (0.000)	0.278** (0.014)
Size	0.049*** (0.001)	0.098* (0.090)	0.057*** (0.003)	0.049*** (0.001)	0.049*** (0.000)	0.037** (0.024)
Liquidity	0.001 (0.643)	−0.003 (0.175)	−0.000 (0.804)	0.001 (0.635)	0.001 (0.670)	0.003 (0.118)
Tangible	0.152* (0.100)	0.027 (0.888)	0.138 (0.224)	0.152* (0.091)	0.152 (0.214)	0.206** (0.027)
Intangible	0.010 (0.971)	0.082 (0.815)	0.055 (0.856)	0.010 (0.970)	0.010 (0.954)	0.067 (0.808)
Age	−0.001 (0.245)	0.000 (0.911)	−0.001 (0.389)	−0.001 (0.233)	−0.001 (0.140)	−0.001 (0.248)
_cons	−0.139 (0.151)	−0.323 (0.290)	−0.168 (0.163)	−0.139 (0.140)	−0.139** (0.024)	−0.170 (0.119)
F test	F(38, 255) = 2.55 Prob > F = 0.000
Hausman test		Chi2(13) = 25.40 Prob > chi2 = 0.020
Modified Wald test for groupwise heteroskedasticity in fixed effect regression model		chi2 (39) = 5.0e + 33 Prob > chi2 = 0.000
Wooldridge test for autocorrelation		F(1, 37) = 0.431 Prob > F = 0.516

Source: Authors’ analysis.

Dependent variable ROE.

Table 10. Regression results.

Variable	OLS	FEM	REM	FGLS	Driscoll - Kraay	IV-GMM
FRQ	−0.076 (0.660)	−0.080 (0.658)	−0.076 (0.660)	−0.076 (0.652)	−0.076* (0.096)	−0.076 (0.652)
BOARD1	−1.028 (0.389)	1.139 (0.488)	−1.028 (0.388)	−1.028 (0.377)	−1.028 (0.265)	−1.028 (0.377)
BOARD2	0.499 (0.649)	−2.171 (0.344)	0.499 (0.649)	0.499 (0.641)	0.499 (0.131)	0.499 (0.641)
BOARD3	0.070 (0.926)	−0.130 (0.910)	0.070 (0.926)	0.070 (0.924)	0.070 (0.675)	0.070 (0.924)
BOARD4	1.982*** (0.002)	−0.274 (0.819)	1.982*** (0.002)	1.982*** (0.002)	1.982 (0.226)	1.982*** (0.002)
AUDIT	−0.084 (0.879)	0.072 (0.940)	−0.084 (0.879)	−0.084 (0.876)	−0.084 (0.655)	−0.084 (0.876)
Leverage	−0.794 (0.570)	−2.028 (0.318)	−0.794 (0.570)	−0.794 (0.560)	−0.794 (0.345)	−0.794 (0.560)
Short	0.863 (0.527)	0.926 (0.678)	0.863 (0.526)	0.863 (0.517)	0.863 (0.389)	0.863 (0.517)
Size	0.459* (0.090)	2.998*** (0.010)	0.459* (0.089)	0.459* (0.082)	0.459*** (0.007)	0.459* (0.082)
Liquidity	0.026 (0.402)	0.028 (0.456)	0.026 (0.401)	0.026 (0.390)	0.026 (0.425)	0.026 (0.390)
Tangible	1.489 (0.752)	2.708 (0.490)	1.489 (0.752)	1.489 (0.380)	1.489 (0.109)	1.489 (0.380)
Intangible	1.669 (0.752)	−2.934 (0.681)	1.669 (0.752)	1.669 (0.747)	1.669 (0.126)	1.669 (0.747)
Age	0.006 (0.708)	−0.122 (0.112)	0.006 (0.707)	0.006 (0.701)	0.006 (0.409)	0.006 (0.701)
_cons	−4.631*** (0.009)	−14.565*** (0.0020)	−4.631*** (0.009)	−4.631*** (0.007)	−4.631** (0.040)	−4.631*** (0.007)
F test	F(38, 255) = 1.27 Prob > F = 0.147
Hausman test		Chi2(13) = 21.70 Prob > chi2 = 0.060
Breusch and Pagan Lagrangian multiplier test for random effects	chibar2(01) = 0.00 Prob > chibar2 = 1.000
Wooldridge test for autocorrelation	F(1, 37) = 0.577 Prob > F = 0.452

Source: Authors’ analysis.

Dependent variable ROS.

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Data availability statement

The dataset analysed during the current study are not publicy available due confidential company data by FiinGroup but are available from FiinGroup ([email protected]) on reasonable request.