Ownership concentration and audit fees: do auditors matter most when investors are protected least?
AbstractMinority expropriation could result when controlling shareholders can expropriate minority shareholders and profit from private benefits of control. This agency conflict (named Type II) has been rarely studied, as the most commonly assumed agency conflict resides between managers and shareholders (Type I). We want to study the role of the auditors in reducing the type II agency conflict. Using an audit fees model derived from Simunic (1980), we study the impact of type I and type II agency conflicts on audit fees in code law vs common law countries. We then focus two civil law countries (Germany and France) providing a lower investor protection level, and two common law countries (the USA and UK) providing a higher investor protection level (La Porta et al. 1998, 2000). Our results show 1) a negative relation between audit fees and managerial shareholding, which is stronger for common law than for civil law countries; 2) a curvilinear (concave) relation between audit fees and controlling shareholding for civil law countries; 3) no Type II conflict in the common law countries. These results illustrate the mixed effects of the legal environment and of each agency conflict on audit fees.
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Date of creation: 2010
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Publication status: Published - Presented, Crises et nouvelles problématiques de la Valeur, 2010, Nice, France
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This paper has been announced in the following NEP Reports:
- NEP-ACC-2010-05-08 (Accounting & Auditing)
- NEP-ALL-2010-05-08 (All new papers)
- NEP-BAN-2010-05-08 (Banking)
- NEP-BEC-2010-05-08 (Business Economics)
- NEP-CTA-2010-05-08 (Contract Theory & Applications)
- NEP-ENV-2010-05-08 (Environmental Economics)
- NEP-REG-2010-05-08 (Regulation)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- La Porta, Rafael & Lopez-de-Silanes, Florencio & Schleifer, Andrei & Vishny, Robert, 2001.
"Investor Protection and Corporate Governance,"
Working Paper Series
rwp01-017, Harvard University, John F. Kennedy School of Government.
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