Audit report delay: Does directors’ busyness matter?

Abstract

Fich and Shivdasani (2006) argue that active boards of directors with many external members have poor corporate governance. According to Al-Ajmi (2008), the primary source of information for shareholders in developing countries is financial reporting. This study aims at investigating the connection between director busyness and timely financial reporting. The sample includes 510 non-financial Saudi companies listed on the Saudi Stock Exchange (Tadawul). This study uses the busyness hypothesis, rooted in the agency theory, to explain the relationship between board busyness and audit report delay. The ordinary-least square (OLS) regression result showed a positive correlation between busy directors and timely reporting. This finding indicates that the delay in issuing the audit report is likely to increase if there is a high degree of director busyness. Not many studies have focused on the connection between busy directors and timely reporting in the context of Saudi Arabia. Listed companies, external auditors, the Saudi Stock Exchange, and policymakers should give careful consideration to this study’s findings because of the interesting results showing the negative effects of busy directors on the timeliness of financial reporting.