CORPORATE GOVERNANCE AND THE ROLE OF THE BOARD CHAIR: IMPLICATIONS FOR INFORMATION ASYMMETRY AND INTERNAL AUDITING AMONG FIRMS LISTED ON THE IRAQ STOCK EXCHANGE

The paper focuses on the quality of corporate governance and the leadership position of board chair in two important outcomes in the emerging capital markets: information asymmetry and internal auditing effectiveness. The study constructs quality indices of Corporate Governance Quality (CGQ), Board Chair Effectiveness (BCE), and Internal Auditing Effectiveness (IAE) on using an unbalanced panel of 20 commercial banks traded at the Iraq Stock Exchange (ISX). The study will be developed over the period, 2019 to 2024, using board structure, audit-committee and oversight characteristics, and internal audit independence and competence. Market-based measures (e.g., bid-ask spread-type measures) are used as a proxy of Information Asymmetry (IA) that is often utilized in the literature which relates disclosure quality, audit quality, and market frictions.

The evidence that is shown by panel regression models (fixed- or random-effects selected by Hausman test, strong standard errors) is that stronger governance is related to smaller information asymmetry and greater internal auditing effectiveness. In particular, CGQ has negative and statistically significant correlation with IA and positive and statistically significant correlation with IAE. Similarly, BCE demonstrates negative and significant dependence with IA and positive and significant dependence with IAE, indicating that effective board leadership enhances the power of monitoring, disclosure discipline and the position and independence of the internal audit role.

All in all, the research results demonstrate that the governance architecture and the board chair leadership in the Iraqi banking environment are two complementary processes that may mitigate the presence of information gaps in the market and strengthen the internal assurance capacity. These findings are consistent with the existing evidence that audit-committee and governance systems improve the quality of reporting and that the effectiveness of internal auditing in the Arab/emerging-market environment is closely related to the governance systems and institutional capabilities.