Navigating the Storm: How Economic Uncertainty Shapes Audit Quality in BRICS Nations Amid CEO Power Dynamics

Antonios Persakis () and Ioannis Tsakalos
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Antonios Persakis: Department of Accounting and Finance, School of Economics and Business Administration, University of Thessaly, Gaiopolis Campus, 415 00 Larissa, Greece
Ioannis Tsakalos: Department of Accounting and Finance, School of Economics and Business Administration, University of Thessaly, Gaiopolis Campus, 415 00 Larissa, Greece

JRFM, 2024, vol. 17, issue 7, 1-38

Abstract: This study investigates the association between economic uncertainty and audit quality in the BRICS nations, examining both input-based (e.g., audit fees, auditor tenure) and output-based (e.g., restatements, total accruals) measures of audit quality. Utilizing a dataset of 83,511 firm-year observations from 1995–2022, it reveals a significant negative impact of economic uncertainty on audit quality. Additionally, the research explores the moderating role of CEO power, employing principal component analysis to merge various indicators of CEO influence. Findings indicate that powerful CEOs can mitigate the adverse effects of economic uncertainty on audit quality, suggesting a U-shaped relationship between CEO power and audit quality. Methodologically robust, employing techniques like two-stage least squares (2SLS) and two-stage system generalized method of moments (system GMM) to address endogeneity, the study offers a comprehensive analysis of audit quality in the context of economic fluctuations and corporate governance, contributing significantly to the understanding of these dynamics in emerging economies, particularly in the diverse and influential BRICS nations. This study’s findings have significant implications for stakeholders and policymakers, providing insights that can inform policy decisions and enhance corporate governance frameworks.

Keywords: economic uncertainty; audit quality; BRICS nations; CEO power (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2024
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