Moderating Effect of Audit Quality on the Relationshipbetween Corporate Governance Code and Firm Performance: Evidence from Listed Companies on the Stock Exchange ofThailand

Abstract

The objectives of this research were to examine the effect of corporate governance practices according to the corporate governance code (CG Code) on firm performance, the effect of audit quality on firm performance, and the moderating effect of audit quality on the relationship between corporate governance practices and firm performance. The audit quality was measured by audit fees and the firm performance in this study was measured by Tobin's Q ratio. The samples used in this study were 95 listed companies on the Stock Exchange of Thailand (SET) that have fully implemented the CG Code and voluntarily disclosed their information in the year 2021. Data were collected from the annual reports, financial reporting and the SETSMART database. Content analysis was employed to analyze the CG Code voluntary disclosures, along with statistical methods used to analyze the data, namely multiple linear regression and Hayes’s regression-based analysis. The research results revealed that corporate governance practices, according to the CG Code along with audit quality, both had positive effects on firm performance at a statistically significant level of .01. Audit quality was also found to moderate the positive correlation between CG Code and firm performance, such that the effect of CG Code on firm performance is strengthened as the quality of audits increases. Specifically, the study indicated that the positive effect of CG Code on firm performance was stronger when the audit quality was average and above, whereas CG Code showed no statistically significant effect on firm performance when audit quality was below average.