Audit Committee Characteristics and Quality of Financial Information: The Role of the Internal Information Environment and Political Connections

Omid Mehri Namakavarani, Abbas Ali Daryaei, Davood Askarany and Saeed Askary
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Omid Mehri Namakavarani: Department of Accounting, Qazvin Branch, Islamic Azad University, Qazvin 19585, Iran
Abbas Ali Daryaei: Accounting Department, Faculty of Social Science, Imam Khomeini International University, Qazvin 34148, Iran
Davood Askarany: Business School, Accounting and Finance, the University of Auckland, Auckland 92019, New Zealand
Saeed Askary: Department of Accounting and MIS, Gulf University for Science and Technology, Kuwait City 32093, Kuwait

JRFM, 2021, vol. 14, issue 6, 1-18

Abstract: This study explores the relationship between audit committee characteristics and accounting information quality by justifying the role of the internal information environment and political connections under the theocracy state of Iran with syncretic politics. Using panel data of 558 firms from the Tehran Stock Exchange (TSE) for 2011–2016, we rank firms using Technique for Order Preference by Similarity to Ideal Solution (TOPSIS) and entropy method for determination of the weight of evaluating indicators. The firms are positioned into high- to low-level political connections, and two proxies for audit committee characteristics are used: independence of audit committee and financial knowledge. Furthermore, three proxies are used for an internal information environment: earning announcement speed, the accuracy of earning forecasting and lack of financial restatements. Our findings show that there is a significant and positive relationship between the audit committee and financial information quality characteristics in high-level political connections, as well as between financial knowledge and financial information quality. Furthermore, the findings of this study suggest that the application of political economy theories could be appropriate for more inquiry.

Keywords: audit committee characteristics; accounting information quality; internal information environment; political connections; TOPSIS (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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