Please use this identifier to cite or link to this item: http://hdl.handle.net/10125/64912

Does Common Ownership Impact Auditor Incentives?

File Size Format  
HARC 2020 paper 244.pdf 273.33 kB Adobe PDF View/Open

Item Summary

Title:Does Common Ownership Impact Auditor Incentives?
Authors:K.K. Raman
Chunlai Ye
Lin-Hui Yu
Keywords:Audit pricing
Audit quality
Common ownership
Date Issued:31 Aug 2019
Abstract:Prior research suggests that common ownership (i.e., institutional investors owning significant equity stakes in companies within the same industry) impairs companies’ incentives to compete since owners are less likely to support an aggressive competitive strategy. In this paper, we examine whether common ownership impacts auditor incentives. Using a sample of US firms during the 2003–2017 period, we find that common ownership lowers audit fees and audit effort without impairing audit quality. We perform cross-sectional tests as well as a quasi-natural experiment based on institutional owner mergers to help mitigate concerns about omitted variable bias or reverse causality. Overall, our findings are consistent with the view that common-owners internalize governance externalities and have accumulated more industry-specific monitoring experience, which in turn decreases audit risk.
URI:http://hdl.handle.net/10125/64912
Appears in Collections: 02 Auditing


Please email libraryada-l@lists.hawaii.edu if you need this content in ADA-compliant format.

Items in ScholarSpace are protected by copyright, with all rights reserved, unless otherwise indicated.