Measuring the Impact of Audit Quality on the Relationship between CEO Luxury Consumption and Company Value

Document Type : Original Article

Authors

1 Assistant Professor of Accounting and Auditing - Faculty of Commerce - Zagazig University

2 Assistant Professor, Department of Auditing and Review Faculty of Commerce, Aswan University, and seconded to the College of Applied Sciences, Majmaah University, Kingdom of Saudi Arabia

Abstract

The objective of the current research is to measure the impact of audit quality on the luxury consumption of executives, represented by three different quantitative metrics: the first is the tenure of the executive, the second is free cash flow, and the third is executive turnover. Company value is measured using Tobin's Q (the ratio of market value to book value). Finally, audit quality is measured by the size of the auditing firm, categorized as BIG4 (a dummy variable scoring 1 for firms audited by one of the Big Four firms, and 0 for those audited by smaller firms.
The empirical aspect of the study was conducted on a sample of 79 non-financial joint-stock companies listed on the Egyptian stock market during the study period from 2015 to 2022, Using the Maximum Likelihood Estimation method with AMOS software,R]. Statistical evidence indicated a significant negative effect of audit quality on luxury consumption at a rate of 0.102, which allowed for the acceptance of the first three research hypotheses. Additionally, there was a statistically significant negative effect of luxury consumption (1.561) on company value, leading to a positive effect (0.160) of audit quality on company value at a confidence level of 95%. This allowed for the acceptance of the alternative hypothesis of the last four hypotheses.

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