The Moderating Effect of Audit Quality on the Impact of Audit Committee Characteristics and Performance: Evidence from Saudi Financial Companies

Abstract

Current study aims to provide empirical evidence regarding the impact of audit committee characteristics (independence, size, meetings, and financial literacy) on the performance of financial companies. The paper also focuses on the moderating effect of audit quality on the effect of audit committee characteristics on the performance of financial companies. This study was executed on 44 unique financial companies listed in the Saudi Arabia capital market, Tadawul, over the period 2016-2018, resulting to 132 year-observations. Using pooled panel data regression, the results indicate that audit committee independence, expertise, size, and meetings significantly impact the performance of financial companies. The results also reveal that BIG4 audit firms significantly moderate the effect of audit committee size and meetings on company performance. However, the results show that BIG4 audit firms do not moderate the effect of audit committee independence and expertise on the firm performance. These results may have theoretical and practical implications regarding the audit committee characteristics used in this study, and the recommendations for future research works are also emphasized.