Founding family and auditor choice: Evidence from Taiwan

Founding family and auditor choice: Evidence from Taiwan INTRODUCTIONFamily firms are a distinct type of organizational structure. Unlike non‐family firms, they are often characterized by concentrated family ownership and greater involvement by family members in the management. However, it should be noted that family firms are not a homogeneous group. Differences in family ownership and control features create varied incentives for family owners and consequently influence the agency environment within the firm (e.g., Anderson & Reeb, ; Chen, Cheng, & Dai, ; Wang, ). This in turn may influence auditor choice, which is an important company decision relating to financial reporting. It has been suggested that monitoring by higher‐quality auditors can reduce insiders' incentives and ability to render financial statements less informative, thereby alleviating the problem of agency conflict between insiders and outsiders by mitigating information asymmetry (e.g., Becker, DeFond, & Jiambalvo, ). However, to date, few studies have examined auditing issues in family firms (Ho & Kang, ; Trotman & Trotman, ). This study adds to the existing literature by investigating whether family ownership and control configurations are systematically associated with a firm's choice of auditor. Our analysis focuses on three different features of family ownership and control: founding family ownership (cash flow rights), disparity between http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Corporate Governance Wiley

Founding family and auditor choice: Evidence from Taiwan

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Publisher
Wiley Subscription Services, Inc., A Wiley Company
Copyright
© 2018 John Wiley & Sons Ltd
ISSN
0964-8410
eISSN
1467-8683
D.O.I.
10.1111/corg.12226
Publisher site
See Article on Publisher Site

Abstract

INTRODUCTIONFamily firms are a distinct type of organizational structure. Unlike non‐family firms, they are often characterized by concentrated family ownership and greater involvement by family members in the management. However, it should be noted that family firms are not a homogeneous group. Differences in family ownership and control features create varied incentives for family owners and consequently influence the agency environment within the firm (e.g., Anderson & Reeb, ; Chen, Cheng, & Dai, ; Wang, ). This in turn may influence auditor choice, which is an important company decision relating to financial reporting. It has been suggested that monitoring by higher‐quality auditors can reduce insiders' incentives and ability to render financial statements less informative, thereby alleviating the problem of agency conflict between insiders and outsiders by mitigating information asymmetry (e.g., Becker, DeFond, & Jiambalvo, ). However, to date, few studies have examined auditing issues in family firms (Ho & Kang, ; Trotman & Trotman, ). This study adds to the existing literature by investigating whether family ownership and control configurations are systematically associated with a firm's choice of auditor. Our analysis focuses on three different features of family ownership and control: founding family ownership (cash flow rights), disparity between

Journal

Corporate GovernanceWiley

Published: Jan 1, 2018

Keywords: ; ; ; ;

References

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