Assessing The Influence Of Audit Quality On Share Prices In The Financial Services Sector: The Roles Of Audit Fees, Audit Tenure, And Audit Firm Size
1 Debt Recovery and Management Unit, Yola Electricity Distribution Company Yola. Adamawa State
2 Department of Procurement Management, Center for Innovation in Procurement, Environmental and Social Standards, Joseph Sarwuan Tarka University, Makurdi
* Corresponding author: Princeogbu2007@gmail.com
2 Department of Procurement Management, Center for Innovation in Procurement, Environmental and Social Standards, Joseph Sarwuan Tarka University, Makurdi
* Corresponding author: Princeogbu2007@gmail.com
Abstract
This study addresses the critical issue of the relationship between audit quality and share prices in Nigeria's
financial services sector, a key driver of economic growth that has experienced significant fluctuations in
market valuations. The main aim was to examine the effects of audit fees, audit tenure, and audit firm size
on share prices. Utilizing a sample of 32 financial service firms listed on the Nigerian Stock Exchange from
2013 to 2022, the study employed panel data regression techniques, specifically the GMM II models, to
analyze the data. The findings revealed that both audit fees and audit tenure have significant negative
effects on share prices, indicating that higher audit fees and longer auditor-client relationships can erode
investor confidence and depress market valuations. In contrast, audit firm size did not have a significant
impact, suggesting that the perceived quality benefits of being audited by a Big Four firm do not necessarily
translate to higher share prices in the Nigerian context. The results imply that investors are particularly
sensitive to audit-related costs and the potential compromise of auditor independence over long tenures.
Consequently, it is essential for corporate managers and directors to adopt cost-effective audit practices
without compromising quality, while policymakers should enforce transparency in audit fee disclosures
and mandate auditor rotations to enhance independence. Analysts and investors are advised to scrutinize
audit fee disclosures and monitor auditor tenure as part of their investment decisions. Despite the lack of
significant impact from audit firm size, firms should still consider the reputational advantages of engaging
Big Four auditors. The study underscores the importance of maintaining a balance between audit quality
and associated costs to sustain investor confidence and market stability. Future research should explore
the broader implications of audit quality across different sectors and regions to provide more generalized
insights.
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How to Cite
Otseme, O. G., & A, T. S. (2024). Assessing The Influence Of Audit Quality On Share Prices In The Financial Services Sector: The Roles Of Audit Fees, Audit Tenure, And Audit Firm Size. Bayero Business Review, 8(2), 89-105. https://doi.org/10.67894/bbr.2024.w08hclyj
O. G. Otseme, and T. S. A, "Assessing The Influence Of Audit Quality On Share Prices In The Financial Services Sector: The Roles Of Audit Fees, Audit Tenure, And Audit Firm Size," Bayero Business Review, vol. 8, no. 2, pp. 89-105, October 2024. doi: 10.67894/bbr.2024.w08hclyj
