The effect of audit quality on debt and interest coverage ratios: The moderating effect of the COVID-19 pandemic

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Abstract

This paper investigates the impact of audit quality on the debt and interest coverage ratios of non-financial companies in Jordan, and the impact of the COVID-19 pandemic on this relationship. To achieve these objectives, a sample of 60 companies listed on the Amman Stock Exchange (ASE) during the years 2017–2021, was used. Descriptive statistics and multiple regression analysis were used to analyze the data and test the hypotheses. The findings of the study revealed that there is a significant negative effect of audit firm size on both the debt and interest coverage ratios, which is consistent with Mawutor et al. (2019). However, the effect of audit fees on both ratios is insignificant, which is consistent with Sayyar et al. (2015). Moreover, the impact of COVID-19 on the relationship between all variables is statistically insignificant, which contradicts the results of other studies (Kose et al., 2021). This means that the study provides additional and new evidence about the relationship between audit quality, debt ratio, and interest coverage ratio, within the context of the COVID-19 pandemic.

Keywords: COVID-19, Audit Quality, Debt Ratio, Interest Coverage Ratio, Growth Rate, Company Size

Authors’ individual contribution: Conceptualization — E.N.S.A., A.A.-T.; Methodology — E.N.S.A., A.A.-T., O.M., and M.A.-H.; Validation — A.A.-T.; Formal Analysis — A.A.-T., O.M., and M.A.-H.; Investigation — A.A.-T., O.M., and M.A.-H.; Resources — A.A.-T., O.M, and M.A.-H.; Data Curation — A.A.-T.; Writing — Original Draft — E.N.S.A., A.A.-T. and O.M.; Writing — Review & Editing — A.A.-T., O.M., and M.A.-H.; Visualization — A.A.-T. and M.A.-H.; Supervision — E.N.S.A. and A.A.-T.; Project Administration — O.M. and M.A.-H.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: H83, M41, M42

Received: 21.07.2024
Accepted: 21.01.2025
Published online: 24.01.2025

How to cite this paper: AlZu’bi, E. N. S., Al-Thuneibat, A., Mowafi, O., & Al-Hasan, M. (2025). The effect of audit quality on debt and interest coverage ratios: The moderating effect of the COVID-19 pandemic. Risk Governance and Control: Financial Markets & Institutions, 15(1), 100–109. https://doi.org/10.22495/rgcv15i1p10