Family Ownership, External Audit, and Informal Payments: Evidence for Corporate Governance and Regulatory Compliance in the MENA Region

This study investigates the association between family ownership and informal payments and examines how external audit certification conditions this relationship. Using a sample of 4161 firms from Morocco, Egypt, Tunisia, and Jordan drawn from the EBRD–EIB–World Bank Enterprise Surveys, the empirical analysis employs logit and probit regression models, supplemented by adjusted predicted probabilities and probability contrasts. The findings reveal a significant positive association between family-majority ownership and informal payments in the additive models, consistent with governance concerns arising from concentrated family control. Furthermore, while external audit certification is negatively associated with informal payments, the positive and significant interaction coefficient suggests that this association may be weaker within family-majority firms. However, the difference between the estimated audit contrasts is not statistically significant on the probability scale, providing partial support for this moderating relationship. These results suggest a possible ownership-related boundary condition on formal external monitoring. This pattern may be consistent with institutional decoupling, although the organizational mechanisms underlying the observed association remain to be established. The study concludes that the relationship between external auditing and informal payments should be considered alongside ownership structure, highlighting the importance of examining auditor independence, audit quality, and internal governance arrangements beyond the mere presence of external certification.