External Auditing, Managerial Monitoring and Firm Valuation: An Empirical Analysis for India

Saibal Ghosh

MPRA Paper from University Library of Munich, Germany

Abstract: The paper examines how external auditing and managerial ownership relate to firm valuation. It is argued that both external auditors (which serves as an external monitoring function) and managerial ownership (which serves as an internal monitoring function) affect firm value, while internal monitoring by managers and external monitoring by auditors were viewed as substitutes or complements. After controlling for the effect of exogenous variables, the results reveal the existence of a substitution monitoring effect between auditors and the managerial group. Additionally, firm valuation is found to be a significant determinant of managerial ownership. A disaggregated analysis of firms according to size and leverage suggests the existence of a complementary monitoring effect between auditors and managers, especially for low-leveraged firms.

Keywords: corporate governance; external auditing; managerial ownership; adjusted Q; India (search for similar items in EconPapers)
JEL-codes: G32 M42 (search for similar items in EconPapers)
Date: 2007-03
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Published in International Journal of Auditing 1.11(2007): pp. 1-15

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Persistent link: http://EconPapers.repec.org/RePEc:pra:mprapa:17142

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