Blockholders' Ownership and Audit Fees: The Impact of the Corporate Governance Model

Raul Barroso Casado (), Chiraz Ben Ali and Cédric Lesage
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Cédric Lesage: GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper examines how two prominent corporate governance models, namely the shareholder and stakeholder models, have different effects on the relation between agency conflicts and the supply, and demand of audit services. Shareholder (stakeholder) countries rely heavily on public (private) information to reduce information asymmetry for outside investors in the context of high (low) litigation risk. We expect audit fees to reflect the level of agency conflicts in shareholder countries as well as the needs for information of the major blockholders in stakeholder countries. Using a sample of 7982 firm-year observations from 19 countries, we find a U-shaped relation between controlling shareholding and audit fees for shareholder countries and an inverted U-shaped relation between controlling shareholding and audit fees for stakeholder countries. These results are consistent across different firm-level governance arrangements.

Keywords: governance models; shareholder model; stakeholder model (search for similar items in EconPapers)
Date: 2016-10-26
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Published in European Accounting Review, 2016, 27 (1), pp.149-172. ⟨10.1080/09638180.2016.1243483⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01563002

DOI: 10.1080/09638180.2016.1243483

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