Do key audit matter disclosures influence bank profitability and market value? Insights from emerging markets
-
DOIhttp://dx.doi.org/10.21511/bbs.20(3).2025.17
-
Article InfoVolume 20 2025, Issue #3, pp. 236-248
- 15 Views
-
1 Downloads
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.
- Keywords
-
JEL Classification (Paper profile tab)M42, M41
-
References46
-
Tables6
-
Figures0
-
- 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)
-
- Ab Aziz, N. H., Abdul Latiff, A. R., Osman, M. N. H., & Alshdaifat, S. M. (2025). The interaction effect of family ownership, board gender and skills on CSR strategy with ESG performance: evidence from ASEAN-5 countries. Corporate Governance, 25(4), 948-961.
- Abeysinghe, C. (2020). Integrated reporting and integrated thinking: A commentary on the integrated reporting framework (2013). Colombo Business Journal, 11(2), 142-170.
- Ahmad, A. Y. B. (2024). A novel 3D robotics printer for enhancing auditing and accounting in banking. International Journal of Information Technology, 16(7), 4137-4142.
- Alduneibat, K. A. (2024). Factors Affecting the Level of Key Audit Matters Disclosure: Evidence from Jordan. Jordan Journal of Business Administration, 20(2).
- Alharasis, E. E. (2025). The direct effect of the international standard on auditing-701 requirements on audit profession concerning the reimbursement costs: case study of Jordanian finance industry. Asian Journal of Accounting Research, 10(1), 19-44.
- Ali Mustafa, J. (2024). From innovation to stability: Evaluating the ripple influence of digital payment systems and capital adequacy ratio on a bank’s Z-score. Banks and Bank Systems, 19(3), 67-79.
- Ali, A. A. A., Fayad, A. A., Alomair, A., & Al Naim, A. S. (2024). The role of digital supply chain on inventory management effectiveness within engineering companies in Jordan. Sustainability, 16(18), 8031.
- Alqam, M. A., Hamshari, Y. M., & Ali, H. Y. (2021). The mediating effects of key audit matters on the relationship between audit quality and earnings management: Evidence from Jordan. Humanities and Social Sciences Letters, 9(4), 403-416.
- Alshdaifat, S. M., Abdul-Hamid, M. A., Alhadab, M., Saidin, S. F., & Aziz, N. H. A. (2025). Key Audit Matters and earnings management practice pre and during COVID-19: evidence from Jordan. Asian Journal of Accounting Research, 10(3), 277-293.
- Alshdaifat, S. M., Saleh, M. W., Mansour, M., Khassawneh, A., Shubita, M. F., Hanaysha, J. R., Al-Matari, E. M., Qamhan, M. A., & Alrawad, M. (2024). Audit committee effectiveness in times of crisis: Empirical insights on key audit matters disclosure. Heritage and Sustainable Development, 6(2), 845-860.
- Alzuod, M. A., Alshdaifat, S. M., Atieh, A. A., Al-Amarneh, A., Khrais, L. T., & Hijazin, A. F. (2025). The moderating role of sustainable practices in the relationship between organizational capabilities and technology adoption. Heritage and Sustainable Development, 7(1), 385-400.
- Amara, N., Bouzgarrou, H., Bourouis, S., Alshdaifat, S. M., & Al Amosh, H. (2025). The Interaction Effect of Female Leadership in Audit Committees on the Relationship Between Audit Quality and Corporate Tax Avoidance. Journal of Risk and Financial Management, 18(1), 27.
- Atieh Ali, A. A., Mohamed Udin, Z., & Abualrejal, H. M. E. (2023). The Impact of Humanitarian Supply Chain on Non-Government Organizations Performance Moderated by Organisation Culture. International Journal of Sustainable Development and Planning, 18(3), 763-772.
- Barghathi, Y., Mirani, S., & Khan, N. U. (2021). Audit quality and earnings management after communicating Key Audit Matters (KAMs) in the UAE-audacity and auditors’ perspectives. Journal of Accounting and Management Information Systems, 20(2), 173-198.
- Bulama, F. Y., Ugwudioha, O., Uthman, A. B., Onmonya, L., & Bunu, H. B. (2024). Moderating effect of key audit matters on the relationship between IFRS adoption and financial performance on deposit money banks in Nigeria. Seybold Report Journal, 19(9), 262-284.
- Choiriyah, C., Fatimah, F., Agustina, S., & Ulfa, U. (2020). The effect of return on assets, return on equity, net profit margin, earning per share, and operating profit margin on stock prices of banking companies in Indonesia Stock Exchange. International Journal of Finance Research, 1(2), 103-123.
- Elmarzouky, M., Hussainey, K., & Abdelfattah, T. (2022). Do key audit matters signal corporate bankruptcy? Journal of Accounting and Management Information Systems, 21(3), 315-334.
- Freeman, R. E. (1984). Strategic Management: A Stakeholder Approach. Boston, MA: Pitman.
- Hanaysha, J. R., Saleh, I., Hussain, S., Lee, K. L., & Bakar, Z. A. (2021). Determinants of firm performance in automotive industry: Empirical insights from Malaysia. International Journal of Service Science, Management, Engineering, and Technology (IJSSMET), 12(4), 132-148.
- Jaffar, R., Abu, N. A., Hassan, M. S., & Rahmat, M. M. (2023). Value Relevance of Board Attributes: The Mediating Role of Key Audit Matter. International Journal of Financial Studies, 11(1), 41.
- Jensen, M. C., & Meckling, W. H. (1976). Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics, 3(4), 305-360.
- Kamil, Y., Lund, S., & Islam, M. S. (2023). Information security objectives and the output legitimacy of ISO/IEC 27001: stakeholders’ perspective on expectations in private organizations in Sweden. Information Systems and e-Business Management, 21(3), 699-722.
- Karasek III, R., & Bryant, P. (2012). Signaling theory: Past, present, and future. Academy of Strategic Management Journal, 11(1), 91.
- Lin, J. (2023). Does the disclosure of key audit matters improve the audit quality for sustainable development: Empirical evidence from China. Plos One, 18(5), e0285340.
- Loew, E., & Mollenhauer, T. (2019). An empirical analysis of key audit matters in the financial industry (Working Paper Series No. 40). European Banking Institute.
- Mahd, O., & Idris, M. (2024). Key Audit Matters Between Auditors and Auditees in Middle East and North Africa. Journal of Risk and Financial Management, 17(11), 494.
- Mansour, M., Al Zobi M., Saram, M., Daoud, L., & Marei, A. (2023). Does executive compensation matter to bank performance? Experimental evidence from Jordan. Banks and Bank Systems, 18(3), 164-176.
- Mansour, M., Al Zobi, M., E’leimat, D. A., Abu Alim, S., & Marei, A. (2024). Board gender diversity and bank performance in Jordan. Banks and Bank Systems, 19(1), 183-194.
- McGuigan, N., Haustein, E., Kern, T., & Lorson, P. (2021). Thinking through the integration of corporate reporting: Exploring the interplay between integrative and integrated thinking. Meditari Accountancy Research, 29(4), 775-804.
- Metawee, A. K., Mohammed Ali, E. M. F., & Ibrahim EL-Feky, M. (2024). The Impact of Key Audit Matters Disclosure on Debt Cost: An Applied Study. Egyptian Journal of Business Studies, 48(3), 179-201.
- Mies, M. (2024). Empirical research on banks’ risk disclosure: Systematic literature review, bibliometric analysis and future research agenda. International Review of Financial Analysis, 95, 103357.
- Miles, S. (2017). Stakeholder theory classification: A theoretical and empirical evaluation of definitions. Journal of Business Ethics, 142, 437-459.
- Pointer, L. V., & Khoi, P. D. (2019). Predictors of return on assets and return on equity for banking and insurance companies on Vietnam stock exchange. Entrepreneurial Business and Economics Review, 7(4), 185-198.
- Rahaman, M. M., Hossain, M. M., & Bhuiyan, M. B. U. (2023). Disclosure of key audit matters (KAMs) in financial reporting: evidence from an emerging economy. Journal of Accounting in Emerging Economies, 13(3), 666-702.
- Roszak, S., & Boissin, D. (2024). Integrated Thinking: Bridging the Gap Between Theory and Practice. In Roszak, S., Sandu, R. (Eds.), Integrated Thinking for Long-Term Value Creation (pp. 177-197). Cham: Palgrave Macmillan.
- Saleh, M. W., & Mansour, M. (2024). Is audit committee busyness associated with earnings management? The moderating role of foreign ownership. Accounting Research Journal, 37(1), 80-97.
- Saleh, M. W., Eleyan, D., & Maigoshi, Z. S. (2024). Moderating effect of CEO power on institutional ownership and performance. EuroMed Journal of Business, 19(3), 442-461.
- Shubita, M. F. (2023). The relationship between profitability and cash flow in Jordanian banks. Banks and Bank Systems, 18(4), 195-208.
- Shubita, M. F. (2024). The effect of tax avoidance on firm value with leverage as a moderating variable. Investment Management and Financial Innovations, 21(2), 336-344.
- Singh, N., Lai, K. H., Vejvar, M., & Cheng, T. E. (2019). Data-driven auditing: A predictive modeling approach to fraud detection and classification. Journal of Corporate Accounting & Finance, 30(3), 64-82.
- Spence, M. (1973). Job market signaling. The Quarterly Journal of Economics, 87(3), 355-374.
- Srisuwan, P., Swatdikun, T., Pathak, S., Surbakti, L. P., & Saramolee, A. (2024). Factors Influencing Key Audit Matter Reporting in the Stock Exchange of Thailand: Empirical Evidence from 2016-2020 Data. Journal of Risk and Financial Management, 17(11), 512.
- Suttipun, M., & Swatdikun, T. (2021). KAMs reporting and financial performance: empirical evidence from Thai listed companies. The Journal of Asian Finance, Economics and Business, 8(4), 841-848.
- Taqa, S. B. A. (2025). The Mediating Role of Remote Communication on The Relationship Between Electronic Human Resource Management Practices and Organizational Performance in Iraqi Commercial Banks. Middle East Journal of Communication Studies, 5(1), 52.
- Velte, P., & Issa, J. (2019). The impact of key audit matter (KAM) disclosure in audit reports on stakeholders’ reactions: a literature review. Problems and Perspectives in Management, 17(3), 323-341.
- Wei, X., Zhang, L., Li, J., & Zhou, X. T. (2023). Research on the influence of key audit matters on the audit quality of commercial banks – Evidence from China. Applied Mathematics and Nonlinear Sciences, 8(2), 3241-3258.