The moderating role of audit quality on the relationship between audit committee characteristics and firm performance: evidence from an emerging economy

Purpose This study aims to investigate the moderating role of audit quality on the relationship between audit committee characteristics and firm performance in Bangladesh's emerging economy. Design/methodology/approach Using a sample of DS30 Index companies from 2017 to 2023, the study examines how audit quality influences the effectiveness of audit committee size, independence, expertise and meeting frequency in enhancing firm performance. The results are based on pooled ordinary least squares regression analysis. Findings The results reveal that audit quality positively moderates the relationship between audit committee size and independence with firm performance, measured by both return on assets and earnings per share. However, audit quality shows no significant moderating effect on the relationship between audit committee expertise and firm performance, while it negatively moderates the impact of meeting frequency. These findings suggest that high-quality auditors enhance the effectiveness of certain audit committee characteristics while potentially creating over-monitoring costs when combined with frequent committee meetings. Research limitations/implications The study contributes to the corporate governance literature by providing evidence from an emerging market context and offers important implications for policymakers and practitioners in designing effective governance mechanisms. The findings suggest the need for a more nuanced approach to corporate governance that considers the interactive effects between internal and external monitoring mechanisms. Originality/value The study contributes to the corporate governance literature by providing evidence from an emerging market context, specifically examining the moderating role of audit quality on audit committee characteristics in Bangladesh.