THE MODERATING EFFECT OF AUDIT QUALITY ON THE THIRD-PARTY DISCLOSURES AND FINANCIAL PERFORMANCE OF LISTED MANUFACTURING FIRMS IN NIGERIA.
Abstract
This study examines the moderating effect of audit quality on third-party disclosures and the financial performance of listed manufacturing firms in Nigeria. The study covered the period 2018 to 2022, and the data were analyzed using descriptive statistics and Partial Least Square Structural Equation Modeling (PLS-SEM). The empirical results show that third-party disclosure has a significant positive effect on manufacturing firms’ financial performance. The moderating effect of audit quality on this relationship was significant. The findings also reveal that third-party disclosure has a significant effect on audit quality. This study concludes that third-party disclosure influences manufacturing firms’ financial performance, particularly third-party receivables and sales. This study recommends that third-party sales should be encouraged and that there should be more transparency in reporting third-party transactions because doing so enhances financial performance among other factors in the manufacturing sector
Keywords:
Audit quality, third-party disclosure, and financial performance, PLS-SEMDownloads
Published
DOI:
https://doi.org/10.5281/zenodo.13735930Issue
Section
How to Cite
License
Copyright (c) 2024 Taibat Adebukola Atoyebi, Stella Uwazuluonye Audu, Aminu Umar, Funmi Bara, Popoola Muhammad
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
References
Abere, O., and Saka, S., (2023). Financial performance of Nigerian Manufacturing Firms and Risk Management Practices. Cross Current Int J Agri Vet Sci, 5(3), 25-32.
Ahmed, D., Ahmed, A. and Arafat, H., (2018). Impact of related party transactions on firm value: Evidence from a developing country, Beni-Suef University in Egypt and the University of Portsmouth in the United Kingdom.
Ashanti, A. S. (2015). Effect of liquidity management on the profitability of Jordanian. commercial banks. International Journal of Business and Management, 10(1), 62- 71
Ana, I. M., (2020). Are changes in international accounting standards making them more complex? Accounting Forum, 44:1, 35-63, DOI: 10.1080/01559982.2019.1573781, https://doi.org/10.1080/01559982.2019.1573781
Andreas, E., & Tim, F., (2019). Which Transactions of Related Parties Should Be Subject to Ex-ante Review? Evidence from Germany. European Corporate Governance Institute. Retrieved from: www.ecgi.global/content/working-papers.
Anita, A., and Christiana, D., (2022). Impact of related party transactions on firm value in Indonesia: moderating role of good corporate governance; Accounting, corporate governance, and business ethics: Published online: https://doi.org/10.1080/23311975.2022.2135208
Carolina, B., Carmen, L., & Jerónimo, P., (2017). Related-party transactions, dominant owners, and firm value. Business research quarterly at www.elssevier.es/brq
DeAngelo, L. E. (1981). Auditor size and audit quality. Journal of Accounting and Economics, 3(3), 183-199.
Derek-Teshun, H. and Zhien-Chia, L., (2010), “A study of the relationship between related party transactions and firm value in high technology firms in Taiwan and China. African Journal of Business Management Vol. 4(9), pp. 1924-1931, August 4, 2010 Available online at http://www.academicjournals.org/AJBM ISSN 1993-8233 ©2010 Academic Journals.
Prihastiwi, D., Nurgraheni, A., Pramudyastuti, O., (2023). Does related party transactions disclosure affect the value relevance of financial statements? Universitas Tidal, Jalan Kapten Suparman No. 39, Malang, Indonesia diahprihastiwi@untidar.ac.id
Beerbaum, D. (2019). Underlying philosophical underpinnings of normative and pragmatic accounting. Aalto University School of Business, Department of Accounting, Helsinki, Finland, https://ssrn.com/abstract=4390093
Goddam, E. and Edition, J., (2016), “Does Related –Participant Transactions Affect Financial Performance of Firms in Nigeria,” Department of Accountancy, Faculty of Management Sciences, Nnamdi Azikiwe University, Nigeria.
Fabian, M. J. T., & Sonia, R. B. T., (2022). Wirecard scandal. A commentary on the biggest accounting fraud in Germany’s post-war history. International (Schweiz) AG, St. Gallen, Switzerland; e-mail@e-mail.com Sergi Center for International Development, Harvard University, Cambridge, Massachusetts, US.
Farman, N.H.S. and Alastair, F.A. (2023). "Market value and related party's transactions: a panel data approach", Asian Journal of Accounting Research, Vol. 8 No. 4, pp. 411-424. https://doi.org/10.1108/AJAR-07-2022-0204
Francis, J. R. (2023). What exactly do we mean by audit quality? Accounting in Europe, 1(1), 1-16. doi:10.1080/17449480.2023.2247410
Ghehie, A. A., Yazdani, S., & Khanmohammadi, M. (2020). Audit Quality Measurement Model. International Journal of Finance and Managerial Accounting, 7(25), 1-25.
Hendratama, T. D., & Barokah, Z., (2020). Related party transactions and firm value: The moderating role of corporate social responsibility reporting, China Journal of Accounting Research, ISSN 1755-3091, Elsevier, Amsterdam, Vol. 13, Iss. 2, pp. 223-236, https://doi.org/10.1016/j.cjar.2020.04.002
John C. Burton (1975) FAIR PRESENTATION: ANOTHER VIEW. Retrieved from https://academicworks.cuny.edu/bb_pubs/1079
Khuong, N. V., Trung Kien, T., Bang, L. O. T., Anh, D. H. T., Danh, V. C., Hung, P. X., and Ngan, N. A. (2023). Related party transactions and firm value in an emerging market: Does corporate social responsibility matter? Cogent Economics & Finance, 11(1). https://doi.org/10.1080/23322039.2023.2186036
Majid, A., (2019). The Effect of Related Parties Transactions on the Firm Value: Moderating Role of Audit Committee Department of Accounting, Aliabad Katoul branch, Islamic Azad University, Aliabad Katoul, Iran. (Email: mjd_ashrafi@aliabadiau.ac.ir)
Maaka, Z. A. (2013). Relationship between liquidity risk and financial performance of commercial banks in Kenya. Unpublished MBA Research Project. (MBA dissertation, University of Nairobi)
Matteo, P., & Marco, V., (2013). Related Party Transactions and Financial Performance: Is There a Correlation? Empirical Evidence from Italian Listed Companies Università degli Studi di Napoli “Parthenope”, Napoli, Italy. Email: matteo.pozzoli@uniparthenope.it, marco.venuti@uniroma3.it
Mood, F. C., Zalpha, A. S., & Michele, P. (2011). Related party transactions from a contingency perspective. Springer Science + Business Media, LLC, 2011.
Mood, M.R. and Siti, H.A. (2016), “Do managers reappoint auditors for related party transactions?” Evidence from Selected East Asian Countries. Jurnal Pengurusan 48(2016) 47–60 http://dx.doi.org/10.17576/pengurusan-2016-48-04
Mingche, Q., Shimei, X. and Guangdong, W., (2018), “Corporate Social Responsibility and the Long-term Performance of Mergers and Acquisitions: Do Regions and Related-Party Transactions Matter?” Sustainability 10, 2276; doi:10.3390/su10072276.
Pasc, Lioara-Veronica, Camelia-Daniela Hategan. (2023). Disclosure of Key Audit Matters: Evidence from European Listed Companies on Related Parties Transactions. International Journal of Financial Studies 11(1):82. doi.org/10.3390/ijfs11030082
Santosa, P.W., Rahayu, S.I., Simon, Z.Z. and, Santosa, P.W., (2023). Moderating Roles of Audit Quality and Firm Size in Pretax Profit Margin and Related Party Transactions: Evidence from Indonesia. Published by Vilnius Gediminas Technical University.
Chung, A. T., Sham, Q. H., & Le, H. T. A., (2023). Is related party transactions linked to accounting comparability? Evidence from Emerging Markets powerful Business & Management, 10:1, 2163094, DOI: 10.1080/23311975.2022.2163094 https://doi.org/10.1080/23311975.2022.2163094 © 2023
Qianli, Y. and Liang, W., (2013), “Propping by Controlling Shareholders, Wealth Transfer and Firm Performance Evidence from Chinese Listed Companies”, paper. China Journal of Accounting Research. journal homepage: www.elsevier.com/locate/cjar.
Osakuni, C.A. and Joshua, O., (2019). Effects of Related Party Transactions on the Financial Performance of Companies, Evidenced by a Study of Listed Companies in Nigeria. International journal of economics and financial management (ijefm) e-issn 2545-5966p-issn 2695-1932, Vol. 4 no. 3 2019
Rachman (2021). The Effect of Related Party Transactions on the Performance of Indonesian Listed Companies. Jurnal Manajemen Teknologi Vol. 20 | No. 1 | 2021. http://journal.sbm.itb.ac.id
Rafay, A. (2022). Related party disclosures in financial reporting for Islamic banks. Journal of Islamic Accounting and Business Research, 13(7), 997-1017. DOI: 10.1108/JIABR-03-2020-0066
Shahid, H., Nabeel, S., and Muhammad, A., (2022). Tunneling and Propping through Related Party Transactions in Pakistani Family Business Groups. Journal of Contemporary Issues in Business and Government Vol. 28, No. 01, 2022
Simon, G., Andrea, A., Hussein, T., Seyedmohammadali, S., and Ibrahim, D., (2021). Earnings Management, Related Party Transactions, and Corporate Performance: The Moderating Role of Internal Control. Risks 9: 146. https://doi.org/10.3390/risks9080
