The Impact of Managerial Ability on Audit Outcomes
Keywords:
managerial ability, audit results, corporate governance, information asymmetryAbstract
Objective: This study aims to examine the impact of managerial ability on audit outcomes and the moderating effects of corporate governance and information asymmetry.
Methodology: The study used a ten-year panel dataset of 145 publicly listed firms, totaling 1,450 observations. Managerial ability served as the main independent variable, while audit outcomes—including financial restatements, audit delay, audit fees, and audit opinion type—were the dependent variables. Corporate governance and information asymmetry were treated as moderators. Control variables included firm size, return on assets, leverage, loss status, market-to-book ratio, audit firm size, and audit firm changes. Logistic regression was employed for binary outcomes, and generalized least squares regression was applied for continuous outcomes.
Findings: Results indicate that managerial ability significantly reduces the likelihood of financial restatements, audit delay, and audit fees, while increasing the probability of receiving an unmodified audit opinion. Corporate governance moderates the effects, such that managerial ability has stronger impacts in firms with weaker governance structures. Information asymmetry amplifies the effectiveness of managerial ability, enhancing audit quality and reducing reporting errors. Control variables such as firm size, return on assets, and leverage also showed significant relationships with audit outcomes.
Conclusion: The findings suggest that skilled managers can improve audit outcomes by enhancing financial reporting quality and reducing audit risk, and that the strength of corporate governance and the level of market information asymmetry determine the magnitude of these effects.
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