Audit firm attributes and financial performance: Traditional vs market-based measures in listed Nigerian manufacturing firms

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Type of the article: Research ArticleA comparative assessment of how audit firms’ attributes affect financial performance using both market-based and traditional metrics remains limited in emerging markets. Hence, the study evaluated the comparative effect of audit firms’ attributes on financial performance measured by market-based and traditional metrics. Secondary data from thirty-five manufacturing companies listed at the Nigerian Exchange Group from 2012 to 2022 were analyzed. These companies are purposively selected from a population of fifty-six. Descriptive statistics and panel data regression analysis were used in the data analysis. Results indicate that audit firm resource availability has a significant positive effect on earnings per share (β = 2.1550; p ≤ 0.05), while other proxies of audit firm attributes do not have a significant effect when traditional metrics of financial performance (i.e., earnings per share and share price) were used. However, when market-based metrics of financial performance (market value added and economic value added) are used, audit firm resources availability has a positive significant effect on both market value added (β = 3.842; p ≤ 0.05) and economic value added (β = 0.1789; p ≤ 0.05). The study concluded that audit size, tenure, and industry specialization do not influence firm financial performance, but audit resource availability does. Besides, using market-based financial performance metrics yields more consistent results than traditional metrics.

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