Economics at your fingertips  

Does Auditors' Reputation 'Discourage' Related Party Transactions? The French Case

Moez Bennouri (), Mehdi Nekhili () and Philippe Touron
Additional contact information
Philippe Touron: Pôle Finance Responsable - Rouen Business School - Rouen Business School

Post-Print from HAL

Abstract: Regulators, standard setters and market participants consider related party transactions a major problem in financial markets. The quality of external auditing may be proposed as an important governance mechanism to alleviate the propensity of insiders to use related party transactions. We test the prevalence of audit quality to reduce the number of these transactions. We consider that audit quality is positively correlated with audit reputation. We use a unique data set with a sample of 85 French firms over the period 2002-2005. The French legal system allows us to concentrate on the reputation dimension of audit firms, as a motivation that mitigates the propensity of insiders to initiate related-party transactions. The results show that high quality external audit firms reduce significantly the frequency of related-party transactions. The effect of audit quality seems to be the most important variable explaining the frequency of related-party transactions. These results are obtained after controlling for the selection bias related to the choice of external auditors, using a two-step Heckman procedure.

Keywords: Ownership structure; Related party transaction; Audit; Reputation; Corporate governance; Ownership structure. (search for similar items in EconPapers)
Date: 2011-06-12
Note: View the original document on HAL open archive server:
References: Add references at CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Published in International Symposium on Audit Research, Jun 2011, Québec, Canada

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Working Paper: Does Auditors' Reputation 'Discourage' Related-Party Transactions? The French Case (2015)
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:

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().

Page updated 2020-01-04
Handle: RePEc:hal:journl:hal-00714209