THE EFFECT OF AUDIT QUALITY ON THE MARKET VALUE OF LISTED FINANCIAL FIRMS IN NIGERIA

Abstract

This research investigates the impact of audit quality on the market value of listed financial services firms in Nigeria, utilizing an ex-post facto research design. The study encompasses 35 firms consistently listed on the Nigerian Exchange Group between 2011 and 2021, employing purposive sampling to ensure comprehensive and accurate data. Secondary data sourced from the Nigerian Stock Exchange Factbook and annual reports of the sampled companies were used for analysis. The independent variables considered were audit opinion, audit tenure, audit firm size, and audit fees, while the dependent variable was the firm's market value. A panel regression technique, specifically fixed and random effect models, was applied to evaluate the relationships. Descriptive statistics revealed varying degrees of associations among the variables, with the Shapiro-Wilk test indicating normal distribution for audit tenure and audit firm size. Correlation analysis showed significant positive associations between firm market value and audit fees, and a moderate positive association with audit firm size. The regression results indicated that audit fees positively and significantly impact market value, while audit firm size surprisingly showed a negative effect. Audit opinion and audit tenure, however, did not exhibit significant impacts. These findings contribute to the understanding of how different facets of audit quality influence the market value of financial services firms in Nigeria, with implications for regulatory policies and audit practices.