Authors: Fatma Zehri *
Affiliations:
Accounting Department, Business College, Al Imam Mohammad Ibn Saud Islamic University (IMSIU), Riyadh 12477, Saudi Arabia
This study examines the impact of ownership structure and board characteristics on the demand for high-quality audit services in Saudi-listed firms, drawing on agency and stakeholder theories. Using panel data from 162 firms listed on the Saudi Stock Market (Tadawul) between 2018 and 2023, audit quality is measured by auditor brand (Big Four vs. non-Big Four), with audit fees used as an alternative measure for robustness. A Two-Stage Least Squares (2SLS) regression with instrumental variables is applied to address endogeneity. The findings reveal that firms with higher foreign and institutional ownership are more likely to engage high-quality auditors, while family ownership has no significant effect. Additionally, greater board independence and gender diversity positively influence the demand for audit quality. These results are consistent across different measures of audit quality. The study offers valuable insights for investors, policymakers, and regulators, suggesting that promoting independent and diverse boards, along with encouraging foreign institutional investment, can enhance audit quality, reduce agency costs, and strengthen corporate governance in Saudi Arabia.
Audit quality, Ownership structure, Board characteristics, Corporate governance, Saudi stock market
https://doi.org/10.21833/ijaas.2025.05.015
Zehri, F. (2025). Ownership structure, board characteristics, and audit quality demand: Evidence from Saudi-listed companies. International Journal of Advanced and Applied Sciences, 12(5), 156–167. https://doi.org/10.21833/ijaas.2025.05.015