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Board Characteristics and Audit Fees: Why Ownership Structure Matters?

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  • Desender, Kurt A.

    (Universitat Autonoma de Barcelona)

  • Garcia-Cestona, Miguel A.

    (Universitat Autonoma de Barcelona)

  • Crespi, Rafel

    (Universitat Illes Balears)

  • Aguilera, Ruth V.

    (University of Illinois at Urbana-Champaign)

Abstract

Analyzing 247 French and Spanish listed companies, we evaluate the influence of the ownership structure and the board of directors on the demand for external audit services. We argue that controlling shareholders influence the priorities of the board to focus on the provision of resources rather than monitoring. In contrast, boards in widely-held firms have a stronger focus on monitoring. To test our arguments, we explore how the relationship between the board of directors and the demand for audit is contingent on the firm's ownership structure. Our results show that the ownership structure has a significant influence on the board's priorities and the demand for audit. In addition, we uncover that for widely-held firms, board independence and CEO duality are positively related to the audit fees. In contrast, for closely-held firms, the relationship between board characteristics and the demand for external audit becomes insignificant.

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Bibliographic Info

Paper provided by University of Illinois at Urbana-Champaign, College of Business in its series Working Papers with number 09-0107.

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Date of creation: Nov 2009
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Handle: RePEc:ecl:illbus:09-0107

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Web page: http://www.business.uiuc.edu/Working_Papers/Main.asp
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Cited by:
  1. Dalla Pellegrina, Lucia & Saraceno, Margherita, 2011. "Securities class actions in the US banking sector: Between investor protection and bank stability," Journal of Financial Stability, Elsevier, vol. 7(4), pages 215-227, December.
  2. Strøm, Reidar Øystein & D’Espallier, Bert & Mersland, Roy, 2014. "Female leadership, performance, and governance in microfinance institutions," Journal of Banking & Finance, Elsevier, vol. 42(C), pages 60-75.
  3. Saibal Ghosh, 2011. "Firm ownership type, earnings management and auditor relationships: evidence from India," Managerial Auditing Journal, Emerald Group Publishing, vol. 26(4), pages 350-369, May.
  4. Aguilera, Ruth V. & Desender, Kurt A. & Kabbach de Castro, Luiz Ricardo, 2011. "A Configurational Approach to Comparative Corporate Governance," Working Papers 11-0103, University of Illinois at Urbana-Champaign, College of Business.

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