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Corporate governance, legal environment, and auditor choice in emerging markets
journal contribution
posted on 2017-12-06, 00:00 authored by Mahmud HossainMahmud Hossain, C Lim, P Siang TanIn this study, we examine the effect of firm-level governance on the firm’s choice of an external auditor. Further, we test how the relation between corporate governance and auditor choice may be affected by the strength of legal environment. The results show that firm-level governance scores are positively related to the firm’s auditor choice. This association is strengthened by country-level legal protection. Specifically, the positive association between auditor choice and the firm-level governance scores is weaker (stronger) in a low (high) legal environment. These findings are robust after controlling for determinants that were found to be significant in earlier research. Overall, our results suggest that the benefits arising from the employment of high-quality auditors are likely to be greater when legal environment is stronger because both auditors and firms are subject to more severe legal punishments for opportunistic behavior.
History
Volume
13Issue
1Start Page
91End Page
126Number of Pages
36eISSN
1793-6705ISSN
0219-0915Location
SingaporePublisher
World ScientificPublisher DOI
Full Text URL
Language
en-ausPeer Reviewed
- Yes
Open Access
- No
External Author Affiliations
Nanyang Technological University; Singapore Management University;Era Eligible
- Yes