Corporate governance and financial reporting quality in Jordanian banking sector: The mediating role of audit quality

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Type of the article: Research Article

Abstract
This study investigates how corporate governance (CG) shapes financial reporting quality in Jordanian banks and whether audit quality mediates this relationship. Motivated by persistent agency challenges and evolving regulatory expectations in emerging markets, the research examines whether core governance principles – discipline, transparency, independence, accountability, and fairness – translate into more timely, comparable, and understandable reports. A cross-sectional survey of senior executives and board members from 20 banks headquartered in Amman produced 214 valid responses (July–November 2022). Measurement validity and reliability were established, and structural equation modeling was used to test direct and indirect pathways. The results show that CG exerts a strong positive effect on financial reporting quality (β = 0.608) and that audit quality independently enhances reporting outcomes. Mediation analysis indicates that audit quality functions as a significant partial mediator of the CG-reporting link (indirect β = 0.247), demonstrating that governance improvements are amplified when supported by competent, independent, and professionally rigorous audits. These findings imply that governance architecture and assurance practices operate as complementary mechanisms: robust boards and effective audit committees create the conditions for high-quality audits, which in turn convert governance intent into decision-useful disclosures. The study provides context-specific evidence from Jordan’s banking sector, clarifying the channels through which governance reforms strengthen reporting credibility. Practically, the results endorse reinforcing audit committee independence, resourcing internal controls, and embedding transparent disclosure norms to sustain market confidence and align with international reporting expectations.

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    • Figure 1. Conceptual framework
    • Figure 2. Result of confirmatory factor analysis
    • Figure 3. Result of structural equation modeling
    • Table 1. Demographic analysis of the respondents (N = 214)
    • Table 2. Measurement model evaluation
    • Table 3. Means, standard deviations, and correlation coefficients
    • Table 4. Structural equation modeling coefficients
    • Conceptualization
      Tareq Bani-Khalid, Sakhr M. Bani-Khaled
    • Data curation
      Tareq Bani-Khalid, Ghaith N. Al-Eitan
    • Formal Analysis
      Tareq Bani-Khalid, Ghaith N. Al-Eitan, Mohammad M. Alkhaldi
    • Investigation
      Tareq Bani-Khalid, Ghaith N. Al-Eitan, Mohammad M. Alkhaldi
    • Methodology
      Tareq Bani-Khalid
    • Project administration
      Tareq Bani-Khalid, Sakhr M. Bani-Khaled
    • Supervision
      Tareq Bani-Khalid, Sakhr M. Bani-Khaled
    • Writing – original draft
      Tareq Bani-Khalid, Ghaith N. Al-Eitan
    • Writing – review & editing
      Tareq Bani-Khalid, Sakhr M. Bani-Khaled, Mohammad M. Alkhaldi
    • Resources
      Ghaith N. Al-Eitan
    • Software
      Ghaith N. Al-Eitan, Mohammad M. Alkhaldi
    • Validation
      Ghaith N. Al-Eitan, Sakhr M. Bani-Khaled
    • Visualization
      Mohammad M. Alkhaldi
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Banks and Bank Systems