Corporate characteristics, audit quality and managerial entrenchment during the COVID-19 crisis: evidence from an emerging country

Abstract

Purpose

The purpose of this paper is to investigate the relationship between some corporate characteristics, audit quality and managerial entrenchment in Tunisian companies.

Design/methodology/approach

The multivariate regression model is used for hypothesis testing using a sample of 224 listed observations on Tunisian Stock Exchange during 2014–2020. An exploratory factor analysis of four variables (chief executive officer (CEO) duality, CEO tenure, CEO seniority and CEO age) is used for calculating a unique index assessing the managerial entrenchment.

Findings

The results show a negative and significant relationship between audit quality and managerial entrenchment. The authors also find that firm characteristics affect management entrenchment. Precisely, corporate financial performance and firm leverage show positive connections with managerial entrenchment (ME). Additional analysis confirms the negative impact of the coronavirus disease 2019 (COVID-19) pandemic on managerial entrenchment level.

Practical implications

The study’s findings have practical implications that may be useful to different stakeholders, policymakers and regulatory bodies interested in reducing management entrenchment. This study offers signals to shareholders about specific governance attributes, namely audit quality, that control the extent of manager's entrenchment.

Originality/value

The originality of this paper consists in focusing on developing countries, namely the Tunisian context; while the managerial entrenchment phenomena has been widely examined in developed markets. Moreover, contrary to the overwhelming majority of previous studies that has used individual indexes for evaluating the entrenchment, the authors calculate a mixed index of managerial entrenchment using the principal component analysis based on four governance mechanisms (CEO duality, CEO age, CEO seniority and CEO tenure).

Citation

Dakhli, A. and Mtiraoui, A. (2023), "Corporate characteristics, audit quality and managerial entrenchment during the COVID-19 crisis: evidence from an emerging country", International Journal of Productivity and Performance Management, Vol. 72 No. 4, pp. 1182-1200. https://doi.org/10.1108/IJPPM-07-2021-0401