Abstract
We analyze the extent to which managerial ownership is associated with auditor selection and the audit firm's assessed overall risk of audit clients. We test the association between managerial ownership and both audit firm size and audit fees in a sample of Australian-listed companies between 2005 and 2015. Prior literature analyzing the relationships in US, UK, and Hong Kong settings found that the significance and direction of the relationship is related to the level of managerial ownership. When managerial ownership levels are compatible with shareholder interests (i.e., “convergence-of-interests”), the relationship between managerial ownership and audit firm size and audit fees is negative. Conversely, when managerial ownership levels are contrary to the interests of shareholders (i.e., “entrenchment”), the relationship is positive. Our results are largely consistent with prior literature, but we document more specifically the levels of ownership at which convergence-of-interests and entrenchment occur in the Australian market.
| Original language | English |
|---|---|
| Number of pages | 19 |
| Journal | Journal of International Accounting, Auditing and Taxation |
| DOIs | |
| Publication status | E-pub ahead of print - 14 May 2019 |
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Managerial ownership, audit firm size, and audit fees : Australian evidence. / Shan, Yuan George; Troshani, Indrit; Tarca, Ann.
In: Journal of International Accounting, Auditing and Taxation, 14.05.2019.Research output: Contribution to journal › Article
TY - JOUR
T1 - Managerial ownership, audit firm size, and audit fees
T2 - Australian evidence
AU - Shan, Yuan George
AU - Troshani, Indrit
AU - Tarca, Ann
PY - 2019/5/14
Y1 - 2019/5/14
N2 - We analyze the extent to which managerial ownership is associated with auditor selection and the audit firm's assessed overall risk of audit clients. We test the association between managerial ownership and both audit firm size and audit fees in a sample of Australian-listed companies between 2005 and 2015. Prior literature analyzing the relationships in US, UK, and Hong Kong settings found that the significance and direction of the relationship is related to the level of managerial ownership. When managerial ownership levels are compatible with shareholder interests (i.e., “convergence-of-interests”), the relationship between managerial ownership and audit firm size and audit fees is negative. Conversely, when managerial ownership levels are contrary to the interests of shareholders (i.e., “entrenchment”), the relationship is positive. Our results are largely consistent with prior literature, but we document more specifically the levels of ownership at which convergence-of-interests and entrenchment occur in the Australian market.
AB - We analyze the extent to which managerial ownership is associated with auditor selection and the audit firm's assessed overall risk of audit clients. We test the association between managerial ownership and both audit firm size and audit fees in a sample of Australian-listed companies between 2005 and 2015. Prior literature analyzing the relationships in US, UK, and Hong Kong settings found that the significance and direction of the relationship is related to the level of managerial ownership. When managerial ownership levels are compatible with shareholder interests (i.e., “convergence-of-interests”), the relationship between managerial ownership and audit firm size and audit fees is negative. Conversely, when managerial ownership levels are contrary to the interests of shareholders (i.e., “entrenchment”), the relationship is positive. Our results are largely consistent with prior literature, but we document more specifically the levels of ownership at which convergence-of-interests and entrenchment occur in the Australian market.
KW - Audit fees
KW - Audit firm size
KW - Convergence-of-interests hypothesis
KW - Entrenchment hypothesis
KW - Managerial ownership
UR - http://www.scopus.com/inward/record.url?scp=85065913753&partnerID=8YFLogxK
U2 - 10.1016/j.intaccaudtax.2019.05.002
DO - 10.1016/j.intaccaudtax.2019.05.002
M3 - Article
JO - Journal of International Accounting, Auditing and Taxation
JF - Journal of International Accounting, Auditing and Taxation
SN - 1061-9518
ER -