Influence of ownership structure on the choice of Big Four independent auditors

Vanessa Carvalho Pereira, Antonio Gualberto Pereira () and José Sérgio Casé Oliveira
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Vanessa Carvalho Pereira: Federal University of Bahia
Antonio Gualberto Pereira: Federal University of Bahia
José Sérgio Casé Oliveira: Federal University of Bahia

International Journal of Disclosure and Governance, 2023, vol. 20, issue 3, No 7, 316-326

Abstract: Abstract The aim of the study is to investigate the influence of the ownership structure on the choice of a Big Four independent audit, expecting a positive relationship if there is an entrenchment effect represented by the voting rights variable and a negative relationship if there is an incentive effect represented by the right cash flow variable. We analyze 122 publicly traded companies listed on B3 between the years 2010–2018. In addition to the variables of interest, we also control other variables that can influence the choice of a Big Four: company size, leverage, return on assets, issuance of ADRs, sector, CEO duality, board independence, B3 governance level and specialist auditor. The study uses an econometric method rarely used in research on this topic, the logit for panel data. The results found suggest that the right to cash flows (incentive effect) negatively influences the choice of a Big Four audit in the national scenario, confirming the second research hypothesis. As for the control variables, the findings suggest that the issuance of ADRs and being a member of a sector, whose auditing firm is a specialist influence the choice for a Big Four. The main contribution made by the work is to expand the evidence about the surrogate effect between internal mechanisms of corporate governance, with emphasis on the capital structure, and external mechanisms of corporate governance, such as the chosen external audit.

Keywords: External audit; Big Four; Ownership structure; Corporate governance (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1057/s41310-023-00175-7

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