External Auditing, Managerial Monitoring and Firm Valuation: An Empirical Analysis for India
AbstractThe paper examines how external auditing and managerial ownership relate to firm valuation. It is argued that both external auditors (which serves as an external monitoring function) and managerial ownership (which serves as an internal monitoring function) affect firm value, while internal monitoring by managers and external monitoring by auditors were viewed as substitutes or complements. After controlling for the effect of exogenous variables, the results reveal the existence of a substitution monitoring effect between auditors and the managerial group. Additionally, firm valuation is found to be a significant determinant of managerial ownership. A disaggregated analysis of firms according to size and leverage suggests the existence of a complementary monitoring effect between auditors and managers, especially for low-leveraged firms.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 17142.
Date of creation: Mar 2007
Date of revision:
Publication status: Published in International Journal of Auditing 1.11(2007): pp. 1-15
corporate governance; external auditing; managerial ownership; adjusted Q; India;
Find related papers by JEL classification:
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- M42 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Auditing
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