Impact of Audit Committee Effectiveness, Internal Audit and Enterprise Risk Management on Financial Reporting Lag: A Threshold Analysis and Quantile Regression Approach

This study investigates whether enterprise risk management (ERM) functions as a mediating mechanism through which audit committee effectiveness (ACE) and internal audit (reflected by its arrangement and expenses) influence financial reporting lag (FRL). This study also tests (a) the nonlinearity of the ERM–FRL relationship and (b) the heterogeneity in the FRL that affects the relationship. The analysis is grounded in agency theory and the resource-based view and draws on 2,352 firm-year observations of companies listed on Bursa Malaysia from 2012 to 2015. The study employs panel static models to account for unobserved heterogeneity across firms alongside threshold regression and quantile regression methodologies. This approach captures nonlinear and distributional effects in the relationship between the variables. The findings indicate that investment in internal audit is essential to enhancing ERM effectiveness, which subsequently contributes to reducing FRL. Additionally, the results show that ERM mediates the relationship between ACE and FRL particularly at low levels of ERM effectiveness and when FRL is not excessively prolonged. The study highlights the importance of ERM in preparing financial reports, thus emphasising its role in ensuring a short FRL for timely decision-making by shareholders. It contributes to the financial reporting literature by offering novel insights into the nonlinear and heterogeneous effects of ERM on reporting timeliness.