EconPapers    
Economics at your fingertips  
 

ownership concentration and audit fees: do auditors matter most when investors are protected least ?

Cédric Lesage () and Chiraz Ben Ali ()
Additional contact information
Cédric Lesage: HEC Paris

No 951, HEC Research Papers Series from HEC Paris

Abstract: Author's abstract. This study examines whether auditors are employed as a monitoring mechanism to mitigate agency problems between controlling shareholders and minority shareholders (named Type II agency conflict). In a context of ownership concentration and poor investor protection, controlling shareholders can easily expropriate minority shareholders and profit from private benefits of control. However, this agency conflict has been rarely studied, as the most commonly assumed agency conflict resides between managers and shareholders (Type I). Using an audit fees model derived from Simunic (1980), we study the impact of type I and type II agency conflicts on audit fees in high vs. low investor protection countries.

We then focus on two countries (Germany and France) providing a lower investor protection level, and two countries (the USA and UK) providing a higher investor protection level (La Porta et al. 1998, 2000). Our results show : 1) a negative relation between audit fees and managerial shareholding, which is stronger for strong than for low investor protection countries;

2) a curvilinear (concave) relation between audit fees and controlling shareholding for low investor protection countries;

3) a lower Type II conflict in the strong investor protection countries. These results illustrate the mixed effects of the legal environment and both agency conflicts on audit fees.

Keywords: audit fees; controlling shareholder; minority expropriation; agency conflict (search for similar items in EconPapers)
Pages: 38 pages
Date: 2011-07-01
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.hec.fr/heccontent/download/4749/114844/ ... CR_951_Lesagepdf.pdf (application/pdf)

Related works:
Working Paper: Ownership concentration and audit fees: do auditors matter most when investors are protected least? (2010) Downloads
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:ebg:heccah:0951

Access Statistics for this paper

More papers in HEC Research Papers Series from HEC Paris HEC Paris, 78351 Jouy-en-Josas cedex, France. Contact information at EDIRC.
Bibliographic data for series maintained by Antoine Haldemann ().

 
Page updated 2021-04-09
Handle: RePEc:ebg:heccah:0951