Abstract
Purpose: This paper aims to analyze whether the corporate governance attributes such as board leadershipstructure, audit committee meetings held, size of independent non-executive directors and size of non-executivedirectors have significant impact on audit quality of manufacturing companies listed on Colombo Stock Exchange,Sri Lanka during 2011 to 2013.Research Design: The study takes 32 manufacturing companies listed in Sri Lanka out of 36 as sample andemploys binary logistic regression method for modeling the association between a binary dependent variable suchas audit quality and multiple independent variables such as board leadership structure, audit committee meetingsheld, size of independent non-executive directors, and size of non-executive directors.Findings: The study finds the logistic regression model for overall evaluation, statistical tests of individualpredictors and goodness-of-fit. As per the output, Hosmer and Lemeshow test reveals the model for goodness offit with chi-square of 17.503 and with probability value of 0.008, which is significant at five percent levels. Cox &Snell R Square reveal 56.2 % of the variance in audit quality. Whereas board leadership structure and auditcommittee meetings held have significant relationship with audit quality, size of non-executive directors and sizeof independent non-executive directors have shown insignificant association.Research Limitation-As sample size is relatively small, there may be a challenge to generalize the results ofthis study widely.Originality-This research contributes to the literature by adding the significant association between somecorporate governance variables and audit quality. The findings from this research could be generalized to thecompanies similar to this category.
Highlights
Corporate governance (CG) takes leadership role in a country’s economic development through private sector’s economy, which provides large contribution to the growth
The researcher addresses the fundamental question: “to what extent do the board leadership structure and features of audit committee have an impact on audit quality of the manufacturing companies listed on Colombo Stock Exchange (CSE) during over a three-year period from 2011 to 2013?” The objective of the study is to assess existing board leadership structure types among companies, attributes of audit committee and how these have impact on audit quality
Research Methodology The study analyzes the impact of leadership structure of the board and audit committee on audit quality of 36 manufacturing companies quoted on Colombo Stock Exchange (CSE)
Summary
Corporate governance (CG) takes leadership role in a country’s economic development through private sector’s economy, which provides large contribution to the growth. In this way, CG is trying to minimize the loss of value that results from the separation of ownership and control. CG is trying to minimize the loss of value that results from the separation of ownership and control This is concerned with the ways by which suppliers of capital to firms assure themselves of getting returns on their investment, according to Shleifer and Vishny (1997). The Australian Standard (2003) defines the corporate governance as the process, by which organizations are directed, controlled, and held to account.
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