The association between board composition and audit report lag: investigating the role of royal and government directors

Abdullah Alhadadi

Journal of Accounting in Emerging Economies, 2025, vol. 15, issue 3, 670-694

Abstract: Purpose - This paper aims to examine the extent to which political and state representation (royal family and government directors) on the board are associated with audit report lag (ARL) within the specific context of Saudi firms. Design/methodology/approach - Drawing on resource dependency theory (RDT), the study offers a novel perspective on how board political connections influence ARL. Based on a large sample of non-financial listed firms, this study comprises 1,700 firm-year observations for the 2008–2018 period. Pooled ordinary least squares regression tests whether there is a relationship between political connections and ARL. Findings - This paper documents three key findings: (1) the presence of politicians significantly reduces ARL; (2) beyond the mere existence of political connections, the strength of these connections (e.g. the proportion of royal and government directors on boards) also contributes to reducing ARL; and (3) the relationship between political connections and ARL seems to be influenced by industry characteristics. The results remain robust even after addressing endogeneity arising from auditor self-selection bias. Practical implications - The findings provide valuable insights into the influence of political connections on audit efficiency. The findings may be applicable to other emerging markets, particularly Gulf Cooperation Council countries and those with similar institutional, cultural and political characteristics. For policymakers and those charged with governance, incorporating royal family members into corporate boards can enhance the timeliness of financial reporting. Furthermore, the study highlights the ceremonial role, which, aside from the substantive monitoring activity, plays a crucial role in reinforcing legitimacy and providing auditors with comfort and reassurance about the reliability of reporting quality. Originality/value - To the best of the author’s knowledge, this study is the first to examine the extent to which the presence of royal family directors on the board influences ARL, particularly from the perspective of an emerging economy.

Keywords: Audit report lag (ARL); Political connections; Financial reporting; Saudi Arabia (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jaeepp:jaee-11-2023-0340

DOI: 10.1108/JAEE-11-2023-0340

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