Investigating the Impact of Corporate Governance, Board Size, Gender Diversity of the Board of Directors, and Independent Audit Committee on Financial Reporting Quality through Financial Leverage and External Audit Quality
Keywords:
Corporate governance, Financial reporting quality, Board size, Gender diversity, Independent audit committee, Financial leverage, External audit qualityAbstract
Objective: The purpose of this study was to investigate the impact of corporate governance, board size, board gender diversity, and independent audit committee on financial reporting quality through the mediating roles of financial leverage and external audit quality in Sina Transportation Company.
Methodology: This study was applied in terms of purpose and descriptive-correlational with a survey approach and structural equation modeling in terms of methodology. The statistical population consisted of 1,351 financial staff, accountants, internal auditors, board members, and executive managers of Sina Transportation Company. Based on Cochran’s formula, 300 participants were selected through proportional stratified random sampling. Data were collected using a researcher-made questionnaire based on a five-point Likert scale. Content validity was confirmed by experts, and reliability was verified through Cronbach’s alpha and composite reliability coefficients. Data analysis was conducted using Smart-PLS software and the partial least squares approach. Model fit indices including GOF=0.691 and SRMR=0.064 confirmed the satisfactory fit of the model.
Findings: The structural model results indicated that corporate governance had a positive and significant effect on financial leverage (β=0.384, p=0.001) and external audit quality (β=0.266, p<0.001). Board size also significantly affected financial leverage (β=0.246, p=0.001) and external audit quality (β=0.431, p<0.001). Furthermore, the independent audit committee significantly influenced financial leverage (β=0.254, p=0.026) and external audit quality (β=0.234, p=0.015). However, board gender diversity showed no significant effect on either financial leverage or external audit quality (p>0.05). In addition, financial leverage (β=0.546, p<0.001) and external audit quality (β=0.317, p<0.001) had positive and significant impacts on financial reporting quality. The indirect effects analysis further demonstrated that corporate governance, board size, and independent audit committee significantly affected financial reporting quality through the mediating roles of financial leverage and external audit quality.
Conclusion: The findings revealed that corporate governance mechanisms, particularly an appropriate board structure and the existence of an independent audit committee, can enhance financial reporting quality through improving financial leverage management and external audit quality. Financial leverage emerged as the strongest mediating variable explaining financial reporting quality. In contrast, board gender diversity did not demonstrate a significant effect within the context of this study.
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Copyright (c) 1404 Naser Shambayati, Elaleh Mohammadi Farani, Hassan Fotouhi, Mahdieh Nateghi (Author)
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