Do key audit matter disclosures influence bank profitability and market value? Insights from emerging markets

  • 17 Views
  • 1 Downloads

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License

Type of the article: Research Article

Abstract
This study examines the effect of disclosure of Key Audit Matters (KAM) on accounting and market performance of Jordanian banks listed on the Amman Stock Exchange over the period 2017–2024. The research is relevant because disclosure of audits is at the heart of winning the confidence of investors and corporate governance. The 13-bank panel data are used over the period of eight years, and fixed effects regression with robust clustered standard errors is employed. Two regressions are estimated: accounting performance in the form of return on assets (ROA) and market valuation in the form of Tobin’s Q. These results are suggestive of the fact that more disclosure of KAM has been negatively and significantly connected with ROA (β = –0.176, p < 0.05), implying short-term profitability constraints, but positively and significantly connected with Tobin’s Q (β = 0.285, p < 0.05), implying greater investor optimism and reduced information asymmetry. These results suggest that although KAM disclosures are not expected to directly improve profitability, they enhance market valuation through enhanced disclosure and governance. The results have policy implications for improving disclosure standards to enhance transparency and stability, and for banks to further work on strengthening the independence and qualifications of audit committees to drive performance improvements.

Acknowledgment
The authors would like to thank Middle East University, Amman, Jordan, for the full funding of this research.

view full abstract hide full abstract
    • Table 1. Research theory foundation
    • Table 2. Descriptive statistics
    • Table 3. Pearson correlations
    • Table 4. Results of fixed effects regression analysis (2017–2024)
    • Table 5. Results of two-step GMM regression (2017–2024)
    • Table 6. Results of fixed effects regression analysis (2022–2024)
    • Conceptualization
      Sajead Mowafaq Alshdaifat, Jamileh Ali Mustafa, Asma’a Al-Amarneh
    • Data curation
      Sajead Mowafaq Alshdaifat
    • Formal Analysis
      Sajead Mowafaq Alshdaifat, Jamileh Ali Mustafa, Asma’a Al-Amarneh, Elina F. Hasan, Areej Faeik Hijazin
    • Funding acquisition
      Sajead Mowafaq Alshdaifat
    • Methodology
      Sajead Mowafaq Alshdaifat, Jamileh Ali Mustafa, Asma’a Al-Amarneh, Elina F. Hasan, Areej Faeik Hijazin
    • Supervision
      Sajead Mowafaq Alshdaifat, Jamileh Ali Mustafa
    • Validation
      Sajead Mowafaq Alshdaifat
    • Visualization
      Sajead Mowafaq Alshdaifat, Elina F. Hasan
    • Writing – original draft
      Sajead Mowafaq Alshdaifat, Asma’a Al-Amarneh, Elina F. Hasan, Areej Faeik Hijazin
    • Investigation
      Jamileh Ali Mustafa, Areej Faeik Hijazin
    • Project administration
      Jamileh Ali Mustafa
    • Resources
      Jamileh Ali Mustafa, Asma’a Al-Amarneh
    • Software
      Jamileh Ali Mustafa
    • Writing – review & editing
      Elina F. Hasan, Areej Faeik Hijazin