The effects of agency conflicts on audit quality demand: Evidence from Tunisia

Soumaya Ayedi (), Azhaar Lajmi () and Emna Boumediene ()
Additional contact information
Soumaya Ayedi: Assistant, GEF2A-Lab, University of Carthage, Faculty of Economics and Management of Nabeul
Azhaar Lajmi: Assistant Professor, GEF2A-Lab, University of Tunis, Higher Institute of Management
Emna Boumediene: Associate professor, MOCFINE, University of Manouba

Economics Bulletin, 2019, vol. 39, issue 3, 2175-2183

Abstract: This study investigates whether agency conflicts affected the demand of audit quality by Tunisian listed firms. Our theoretical framework suggests that firms with high agency conflicts were more likely to demand audit quality. Focusing on owners, shareholders and lenders agency conflicts, we conduct an empirical study based on data from 253 firm-year observations. Our findings are consistent with the predictions of agency theory. We show that an increase in managerial ownership decreases the likelihood that the firm will engage a Big 4 auditor. An increase in ownership concentration and leverage in high investment opportunities set, on the other hand, increases the likelihood of a firm demanding higher audit quality. We document that size of audited client is also a significant determinant of audit quality demand.

Keywords: audit quality; agency theory; ownership structure; leverage; investment opportunities (search for similar items in EconPapers)
JEL-codes: G3 M4 (search for similar items in EconPapers)
Date: 2019-09-30
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.accessecon.com/Pubs/EB/2019/Volume39/EB-19-V39-I3-P204.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-19-00178

Access Statistics for this article

More articles in Economics Bulletin from AccessEcon
Bibliographic data for series maintained by John P. Conley ().