How the Corruption and Predictors of Audit Structure Impact the Firm Performance in Developing Economy?

Authors

  • Imran Ur Rehman PhD Scholar, The Superior University Lahore, Pakistan, Faculty of Management Sciences, COMSATS University Islamabad, Lahore Campus, Pakistan Author
  • Dr. Salman Masood Sheikh Professor, Dean Faculty of Economics and Commerce, The Superior University Lahore, Pakistan Author

DOI:

https://doi.org/10.59075/qgada526

Keywords:

Corruption, Tobin’s Q, Dynamic Panels, Audit Quality, Audit Independence

Abstract

Corruption remains the core issue in developing economies. In the last decade of the 20th century three elected governments were dismissed in Pakistan on account of malpractices and corruption. Present study evaluated the effect of corruption on performance of listed firms first time in the context of Pakistan. The results showed that corruption positively affects the performance of the firm measured by Tobin’s Q. The results revealed that payment of extra money to corrupt government officials to enter social networks and to enjoy the tax benefits, speedy transaction processes and relaxed regulator supervision have positive effect on firms’ performance. The results support the corruption theory of ‘Grease in Wheels’.  This study also examined the impact of Audit Independence and External Audit Quality on performance of listed firms.  The results showed that audit committee independence has a statistically significant and positive impact on firm market value whereas the impact of external audit quality is insignificant on market performance of the firm. The results necessitate anti-corruption measures for the development of the performance of the listed firms. Results also suggest the presence of good corporate governance practices improve the firm’s performance. The present study used data of 86 companies of commodity sectors listed on Pakistan Stock Exchange for 13 years from 2008 to 2020.  Generalized Method of Moments (GMM) is used for analysis.

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Published

2025-01-23

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