The effect of family control on audit fees during financial crisis

Jihad Al-Okaily

Managerial Auditing Journal, 2020, vol. 35, issue 5, 645-665

Abstract: Purpose - The purpose of this study is to empirically examine the effect of family involvement in ownership, management and directorship on audit fees during the crisis and non-crisis periods. Design/methodology/approach - Following Anderson and Reeb (2003), this paper uses a two-way fixed effect model to examine the impact of family control on audit fees in crisis and non-crisis periods. The fixed effects include dummy variables for each year and each industry code in the sample. Findings - This paper finds that during normal economic periods, family firms pay lower audit fees relative to non-family firms because of the incentive alignment or monitoring effect. While, during crisis periods, family firms pay higher audit fees because of the shareholder expropriation effect. Research limitations/implications - The results reported in this paper have both practical and policy implications for the demand and supply of audit services to firms having different ownership structures. Originality/value - This is the first study of its kind to examine the effect of family ownership and involvement on audit fees during the crisis period.

Keywords: Audit fees; Corporate governance; Family firms; Family involvement; Financial crisis; UK listed firms; G34; M41; M42 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eme:majpps:maj-12-2018-2114

DOI: 10.1108/MAJ-12-2018-2114

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