Corporate Ownership Structure and Audit Fees

Corporate Ownership Structure and Audit Fees
Author: Nurul Farha binti Mohamed Rusdi
Publisher:
Total Pages: 186
Release: 2013
Genre: Auditing
ISBN:
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The increasing focus on the impact of different ownership structures is prompted by the existence of monitoring differences by shareholders on corporate affairs including the financial reporting process. The external auditors' reliance on the corporate internal control varies according to the different ownership structures with a concomitant variation in the fees charged to their clients. A number of corporate collapses worldwide have highlighted the need for strong corporate governance to strengthen the financial reporting process with an emphasis on audit quality. The purpose of this study is to investigate the association between corporate ownership structures and audit fees paid to external auditors by Malaysian companies listed on Bursa Malaysia. This study focuses on the extent of the auditor's reliance on the client's internal control inasmuch as the corporate ownership structures are varied, and, ultimately, affect the audit fees. This study applies the agency theory in formulating three hypotheses that guide the results analysis. By employing a multi regression model for a sample of 345 Malaysian companies listed on Bursa Malaysia, this study examines the relationship of ownership structure, namely, managerial ownership, foreign ownership and government ownership with audit fees using data for 2010. The results show a significant positive relationship between audit fees and firms with larger foreign ownership and government ownership but no significant relationship with firms with higher managerial ownership. This study contributes recent evidence concerning the relationship between corporate ownership structure and audit fees. The regulator may consider ownership structure on the standards or regulation setting in order to be practical and operationalized in line with the impact associated with different ownership structures. The practitioners may also design appropriate methodologies and procedures for the different ownership structures for high quality service and to standardize the risk mitigation process.

Corporate Governance Mechanisms and Firm Performance

Corporate Governance Mechanisms and Firm Performance
Author: Shveta Singh
Publisher: Springer Nature
Total Pages: 204
Release: 2022-05-12
Genre: Business & Economics
ISBN: 9811924600
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This book begins by analysing the various corporate governance mechanisms explored in the extant literature and determining their effectiveness in enhancing the firm value using multivariate analysis. The findings are of global relevance as the corporate governance regulations of most countries focus on independent directors as the mainstay of good governance. The empirical evidence from the first objective of this study corroborates the claim that independent directors do not strengthen the firms’ governance quality. The book is one of the few works to have analysed the possible reasons behind the ineffectiveness of the independent directors. Also, in view of the famous concept of the bundle of governance mechanisms, it might be possible that the independent directors strengthen the firms’ governance quality indirectly by strengthening other governance mechanisms. This aspect too has little precedence. This study adopts a novel moderation and mediation approach to analyse the monitoring behaviour of independent directors in relation to other governance mechanisms. The work is a must read for corporate players as well as researchers and scholars studying this discipline.

Blockholders' Ownership and Audit Fees

Blockholders' Ownership and Audit Fees
Author: Raúl Barroso
Publisher:
Total Pages: 37
Release: 2016
Genre:
ISBN:
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This paper examines how two prominent corporate governance models, namely the shareholder and stakeholder models, have different effects on the relation between agency conflicts and the supply, and demand of audit services. Shareholder (stakeholder) countries rely heavily on public (private) information to reduce information asymmetry for outside investors in the context of high (low) litigation risk. We expect audit fees to reflect the level of agency conflicts in shareholder countries as well as the needs for information of the major blockholders in stakeholder countries. Using a sample of 7982 firm-year observations from 19 countries, we find a u-shaped relation between controlling shareholding and audit fees for shareholder countries and an inverted u-shaped relation between controlling shareholding and audit fees for stakeholder countries. These results are consistent across different firm-level governance arrangements.

Ownership Structure and Auditor Selection

Ownership Structure and Auditor Selection
Author: Curtis M. Hall
Publisher:
Total Pages: 27
Release: 2020
Genre:
ISBN:
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Purpose: This paper investigates the effect that ownership structure (public vs. private) has on the demand for high-quality auditors, specifically in the U.S. banking industry.Design/Methodology/Approach: We predict that public banks are more likely to hire a high-quality auditor than private banks and pay a higher audit fee premium for that high-quality auditor (due to higher agency costs, more demand for financial information and higher litigation risk). We analyze 2008-2014 banking data from the Federal Reserve using probit and OLS regression analysis to examine if there is a higher probability that public banks choose higher quality auditors and pay higher audit fees when they do so.Findings: Our results show that private banks are less likely to hire Big 4 auditors and industry-expert auditors than public banks. We also find that both private and public banks pay higher audit fees for Big 4 and industry-expert auditors, and that public banks pay a higher premium for Big 4 auditors and industry experts than private banks.Research Limitations/Implications: Our findings may not be full generalizable to other types of firms, as banking is a heavily regulated and complex industry. However, inferences from our study may be generalizable to other similar industries such as insurance or healthcare.Practical Implications: The results of this paper imply that public and private banks have differing priorities when hiring their financial statement auditor. This may be of interest to investors and auditing regulators.Social Implications: The findings of this paper underscore the value of hiring an industry-expert auditor in an industry that is highly complex and regulated. This may be of interest to managers and policymakers.Originality/Value: Due to data restrictions, the emphasis of prior literature on the banking industry has been on public banks. Our study is the first to analyze the differences between public and private banks' demand for audit services.

Corporate Governance and Its Implications on Accounting and Finance

Corporate Governance and Its Implications on Accounting and Finance
Author: Alqatan, Ahmad
Publisher: IGI Global
Total Pages: 425
Release: 2020-09-25
Genre: Business & Economics
ISBN: 1799848531
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After the global financial crisis, the topic of corporate governance has been gaining momentum in accounting and finance literature since it may influence firm and bank management in many countries. Corporate Governance and Its Implications on Accounting and Finance provides emerging research exploring the implications of a good corporate governance system after global financial crises. Corporate governance mechanisms may include board and audit committee characteristics, ownership structure, and internal and external auditing. This book is devoted to all topics dealing with corporate governance including corporate governance characteristics, board diversity, CSR, big data governance, bitcoin governance, IT governance, and governance disclosure, and is ideally designed for executives, BODs, financial analysts, government officials, researchers, policymakers, academicians, and students.

Multiple Large Shareholders, Audit Committee Activity and Audit Fees

Multiple Large Shareholders, Audit Committee Activity and Audit Fees
Author: Ismail A. Adelopo
Publisher:
Total Pages: 0
Release: 2010
Genre:
ISBN:
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We examine the impact of ownership structure on audit pricing, using number of Multiple Large Shareholders (MLS), in order to understand their monitoring and oversight function. Previous studies have focused exclusively on percentage holding as a measure of ownership structure with less than convincing outcomes. We responded to the call in Edman and Manso (2009) to explore the monitoring roles of MLS. We found that majority of listed firms in the UK have multiple large shareholders. The results of our one way analysis of variance (one way-ANOVA) showed that there are statistically significant differences in the audit fees, firm size and audit committee activities of these firms when they are categorised into “widely held”, “concentrated” and “highly concentrated” firms. We found that widely held firms are bigger in size, tend to pay more in audit fees and have more active audit committees. Results from our multiple regression models confirm a significant negative relationship between audit fees and number of MLS. We also found a positive relationship between audit fees and audit committee activities. Our findings are important for policy makers and market regulators who are interested in enhancing market confidence through transparent reporting and improved audit quality. It also confirms the likely beneficial effects of more active institutional investors monitoring as proposed in the recent Walkers report in the form of a Stewardship Code for institutional investors in the UK.

Do Audit Committees Reduce the Agency Costs of Ownership Structure?

Do Audit Committees Reduce the Agency Costs of Ownership Structure?
Author: Charlie X. Cai
Publisher:
Total Pages: 59
Release: 2011
Genre:
ISBN:
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We investigate the agency costs of corporate ownership structure and the role of audit committees in mitigating their effect. Using China as a laboratory, where audit committees are voluntary, we study the demand for and value relevance of audit committees conditional on the various agency costs of corporate ownership. Audit committees are shown to complement existing internal governance systems by reducing the agency conflicts embedded in ownership structure. They are always value relevant, the magnitude of which depends upon the level and complexity of the ownership lattice. Finally, audit committees substitute for inefficient external regulatory environments, particularly where weak legal institutions predominate. Our results are robust to firm size, investment level and financial leverage.