The Impact of Corporate Governance on Firm Profitability Using Earnings Quality as a Moderating Variable: An Empirical Study

AbstractPurpose –This study examines the impact of corporate governance mechanisms on firm profitability considering the moderating impact of earnings quality.Design/methodology/approach – The study uses a quantitative approach to assess the relationship between corporate governance mechanisms on firm profitability using earnings quality as a moderating variable for a sample of 40 Egyptian firms from the EGX 100-listed Egyptian companies for the period 2019-2023. The GLS regression analysis using STATA software was run to test the hypotheses. Findings – The results demonstrate a positive impact of board independence (BI), board size (BS), and firm size (FSize) on firm profitability. Additionally, earnings quality positively moderates the relationship between audit quality and firm profitability, as higher earnings quality strengthens the association between audit quality and firm profitability.Originality/value – This study contributes to the literature on the determinants of the relationship between corporate governance mechanisms and firm profitability, with particular emphasis on the moderating role of earnings quality. The findings provide empirical evidence that board characteristics enhance monitoring, reduce managerial opportunism, and strengthen transparency, thereby improving investor confidence and decision-making. Moreover, earnings quality is shown to reinforce the association between audit quality and investor response, as higher-quality earnings enhance the reliability of financial reporting and profitability. Collectively, these mechanisms play a vital role in improving firm performance..