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Impact of board ownership, CEO-Chair duality and foreign equity participation on auditor quality choice of IPO companies

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Purpose – The purpose of this paper is to examine the impact of corporate governance on auditor
quality choice by IPO companies in an emerging market setting. It seeks to identify whether efficiency
or opportunism is the driving force behind the choice of auditors in Bangladeshi firms going public.
We try to see whether ownership concentration in the hands of a owner-CEO wins over foreign
shareholders in the contest of ensuring financial reporting quality.
Design/methodology/approach – Multivariate analysis has been carried out on all IPOs made
during 1990 to 2005 whose financial statements were available. Logistic regression tool has been used to
identify client’s corporate governance attributes affect their choice of auditors. In total, three corporate
governance attributes – CEO-Chair duality, retained ownership, and foreign equity participation –
were used to test the impact of ownership structure on auditor choice.
Findings – Our findings from logistic regression suggest that CEO-Chair duality and the degree of
foreign equity participation are significant determinants of auditor choice while proportion of board
ownership is not. In addition, issuer size and whether the issuer is a green field operation also influence
auditor choice while the length of a firm’s operating history does not seem to matter. The findings
support agency theory prediction that (at least one category of) principals (foreign shareholders in this
case), are likely to trade-off higher monitoring costs (of hiring a higher quality auditor) with agency
costs arising from asymmetric information, primarily borne by absentee owners.
Originality/value – The work is based on empirical data directly from company financial
statements. It uses audited financial statements and makes objective analysis of auditor choice
dynamics in a frontier market that demonstrated significant growth of IPO activity in recent years.

Keywords Auditing, Auditors, Accounting, Bangladesh, Initial public offering, Corporate governance,
Auditor choice

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Informasi Detail

Judul Seri

International Journal of Accounting and Information Management

No. Panggil

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Penerbit

: Emerald Group., 2013

Deskripsi Fisik

International Journal of Accounting and Information Management Vol. 21 No. 2, 2013 pp. 148-169

Bahasa

English

ISBN/ISSN

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Klasifikasi

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Tipe Isi

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Tipe Media

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Tipe Pembawa

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Edisi

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Subjek

AKUNTANSI

Info Detail Spesifik

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Pernyataan Tanggungjawab

Asmawati/Syahrial

Versi lain/terkait

Lampiran Berkas

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