This paper aims to investigate the relationship between audit firm size and firm profitability in Jordan. It introduces the accounting and finance experience of the audit committee chair and the overlap of the audit committee chair as moderating variables to examine their influence on the relationship between them.
This quantitative study analysed 68 Jordanian service and industrial firms from 2018 to 2022, yielding 340 observations. Financial firms are excluded because of their regulatory differences. Regression models using feasible generalised least squares (FGLS) addressed heteroscedasticity and autocorrelation. The paper measures the variables of audit committee chair experience and overlap using a binary variable. This approach captures the main differences, although it may overlook subtle differences.
The authors found that audit firm size alone does not significantly affect profitability. However, the accounting and finance experience of the audit committee chair positively moderates this relationship, enhancing profitability, whereas chair overlap negatively moderates it, thereby reducing profitability.
To the best of the authors’ knowledge, study is the first to examine the moderating role of audit committee chair experience and chair overlap in the relationship between audit firm size and profitability. This research contributes to the theoretical framework through new findings that support agency and resource dependence theories regarding chair experience, while challenging assumptions of resource dependence theories and confirming agency theory regarding overlapping chairs. Furthermore, this study provides empirical evidence to help formulate a Corporate Governance Code in developing countries, especially Jordan, where the code overlooks key characteristics of the audit committee chair.
