Investigating the Relationship between Audit Quality Metrics and Market Value of Listed Manufacturing Firms in Nigeria

Abstract

Manufacturing firms are front sector of developing a nation but facing continuous experience of stock price volatility and loss of investors’ confidence due to perceived audit failures within Nigerian context. The study adopts Signalling theory because it provides value relevance of stock market information to the investors. The study sources secondary data from the annual reports and accounts of twenty-six (26) firms out of thirty-two (32) firms in the manufacturing sector quoted on the Nigerian Exchange Group. The study adopts ex – post facto research design and multi-stage sampling techniques with e-view as a statistical tool. The findings reveal that audit firm size showed a negative significant relationship with market value (p = 0.98, β = -0.15), audit tenure showed a positive but insignificant relationship with market value (p = 0.68, β = 0.09) while audit fees has a positive significant effect on market value (p = 0.01, β = 0.68). The combined effect of audit quality metrics signifies joint positive significant effect on the market value (F value is 26.80; P (F-statistic) is 0.00). In conclusion, manufacturing firms may place less emphasis on the reputational signals of Big 4 but more attention on audit fees whenever engaging an audit firm. Recommendations are directed to the attention of the regulators in ensuring transparency in reporting audit fees and professional accounting bodies in Nigeria to ensure strict compliance with audit quality metrics particularly Audit fees.