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Is auditor independence endogenous: evidence and implications for public policy

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  • Dino Falaschetti
  • Michael J. Orlando

Abstract

This paper examines the extent to which firm-specific levels of auditor-independence are codetermined with alternative inputs to governance production. We identify a number of governance-producing mechanisms that are causally or simultaneously related to auditor independence. These results are shown to be robust to omitted variable bias. Consequently, prescriptive regulation of auditor independence will be at least partly offset by firm adjustments on alternative governance-producing margins. ; Original title: Optimization in production of corporate governance - evidence from auditor independence and implications for public policy

Suggested Citation

  • Dino Falaschetti & Michael J. Orlando, 2003. "Is auditor independence endogenous: evidence and implications for public policy," Research Working Paper RWP 03-13, Federal Reserve Bank of Kansas City.
    • Handle: RePEc:fip:fedkrw:rwp03-13
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    File URL: https://www.kansascityfed.org/documents/5385/pdf-RWP03-13.pdf
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    Public policy; Corporate governance;

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