A Cross‐Country Study of the Impact of Ownership Structure on the Voluntary Audit Decisions of Private Entities in Developing Countries

Sudipta Bose and Sarowar Hossain

Accounting and Finance, 2025, vol. 65, issue 4, 4006-4038

Abstract: This study investigates the relationship between ownership structure and voluntary audit decisions using a sample of 29,143 private entities across 112 developing countries. The findings indicate that private entities with higher foreign and government ownership are more likely to engage in voluntary audits, while those with greater block ownership are less likely to do so. The positive (negative) impact of foreign and government ownership (block ownership) on voluntary audit is more (less) pronounced in countries with weaker creditor rights, stronger financial development and higher corruption, although the effect of foreign ownership does not significantly vary with corruption levels. Additionally, we find that the positive relationship between foreign ownership and voluntary audit is weakened in the presence of government ownership, suggesting a potential substitution effect. These findings offer important implications for regulators, auditors and policymakers, underscoring the need to consider both ownership structures and institutional contexts when designing audit regulations and governance policies for private entities.

Date: 2025
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