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Auditor choice in privatized firms: Empirical evidence on the role of state and foreign owners

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  • Guedhami, Omrane
  • Pittman, Jeffrey A.
  • Saffar, Walid
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    Abstract

    We rely on a unique dataset of 176 privatizations from 32 countries to extend recent research on the link between the political economy and accounting transparency by examining the importance of shareholders' proportionate holdings to auditor choice. Consistent with our predictions on shareholders' diverging interests in high-quality financial reporting that manifests in auditor choice, we report strong, robust evidence that privatized firms worldwide become less (more) likely to appoint a Big Four auditor with the extent of state (foreign) ownership. Moreover, we find that these relations between shareholders' equity stakes and auditor choice strengthen when country-level governance institutions are weaker.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Accounting and Economics.

    Volume (Year): 48 (2009)
    Issue (Month): 2-3 (December)
    Pages: 151-171

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    Handle: RePEc:eee:jaecon:v:48:y:2009:i:2-3:p:151-171

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    Web page: http://www.elsevier.com/locate/jae

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    Keywords: Auditor choice Privatization Disclosure Corporate governance;

    References

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    Cited by:
    1. Boubakri, Narjess & Cosset, Jean-Claude & Saffar, Walid, 2013. "The role of state and foreign owners in corporate risk-taking: Evidence from privatization," Journal of Financial Economics, Elsevier, vol. 108(3), pages 641-658.
    2. Boubakri, Narjess & Cosset, Jean-Claude & Guedhami, Omrane & Saffar, Walid, 2011. "The political economy of residual state ownership in privatized firms: Evidence from emerging markets," Journal of Corporate Finance, Elsevier, vol. 17(2), pages 244-258, April.
    3. Borisova, Ginka & Brockman, Paul & Salas, Jesus M. & Zagorchev, Andrey, 2012. "Government ownership and corporate governance: Evidence from the EU," Journal of Banking & Finance, Elsevier, vol. 36(11), pages 2917-2934.
    4. Saffar, Walid, 2014. "The political economy of share issue privatization: International evidence," Journal of Multinational Financial Management, Elsevier, vol. 24(C), pages 1-18.
    5. Narjess Boubakri & Sadok El Ghoul & Omrane Guedhami & Anis Samet, . "The Effects of Analyst Forecast Properties on the Cost of Debt: International Evidence," Finance Working Papers 15-12/2013, School of Business Administration, American University of Sharjah.
    6. Armstrong, Christopher S. & Guay, Wayne R. & Weber, Joseph P., 2010. "The role of information and financial reporting in corporate governance and debt contracting," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 179-234, December.

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