Heterogeneous Impacts of Corporate Governance and Intellectual Capital on Audit Quality: Evidence from India Employing Quantile Regression Approach

Abstract

High audit quality signals greater transparency and credibility of corporate reporting and actions. The study aims to examine the heterogeneous impact of corporate governance attributes and intellectual capital on audit quality, which has remained unexplored in the empirical literature. The study consists of randomly selected 100 non-financial firms from the list of Bombay Stock Exchange 500 index for 2017–2021. We proxied audit quality using audit fees and measured intellectual capital efficiency using the value-added intellectual coefficient methodology. Similarly, corporate governance attributes are represented by role duality, promoter shareholding, board gender diversity, and audit committee independence. A simultaneous quantile regression model at eight different quantiles of audit quality has been adopted. The results evince that the impacts of various corporate governance variables are heterogeneous on audit quality. Role duality and promoter shareholding negatively influence audit quality, while board gender diversity and audit committee independence reveal a positive impact. However, the impact is more pronounced in all cases at the upper locations of the conditional distribution of audit quality. Regarding intellectual capital efficiency, the findings exhibit a negative impact up to the 0.7 quantile and a positive impact thereafter. Thus, given the heterogeneous impact of corporate governance on audit quality, policymakers should not adopt homogeneous corporate governance policies.