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The effects of agency conflicts on audit quality demand: Evidence from Tunisia

Author

Listed:
  • Soumaya Ayedi

    (Assistant, GEF2A-Lab, University of Carthage, Faculty of Economics and Management of Nabeul)

  • Azhaar Lajmi

    (Assistant Professor, GEF2A-Lab, University of Tunis, Higher Institute of Management)

  • Emna Boumediene

    (Associate professor, MOCFINE, University of Manouba)

Abstract

This study investigates whether agency conflicts affected the demand of audit quality by Tunisian listed firms. Our theoretical framework suggests that firms with high agency conflicts were more likely to demand audit quality. Focusing on owners, shareholders and lenders agency conflicts, we conduct an empirical study based on data from 253 firm-year observations. Our findings are consistent with the predictions of agency theory. We show that an increase in managerial ownership decreases the likelihood that the firm will engage a Big 4 auditor. An increase in ownership concentration and leverage in high investment opportunities set, on the other hand, increases the likelihood of a firm demanding higher audit quality. We document that size of audited client is also a significant determinant of audit quality demand.

Suggested Citation

  • Soumaya Ayedi & Azhaar Lajmi & Emna Boumediene, 2019. "The effects of agency conflicts on audit quality demand: Evidence from Tunisia," Economics Bulletin, AccessEcon, vol. 39(3), pages 2175-2183.
    • Handle: RePEc:ebl:ecbull:eb-19-00178
    as

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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    audit quality; agency theory; ownership structure; leverage; investment opportunities;
    All these keywords.

    JEL classification:

    • M4 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting
    • G3 - Financial Economics - - Corporate Finance and Governance

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