IDEAS home Printed from https://ideas.repec.org/a/eme/arapps/v24y2016i1p19-42.html
   My bibliography  Save this article

Ownership concentration, family control, and auditor choice

Author

Listed:
  • Salim Darmadi

Abstract

Purpose - – The purpose of this paper is to extend the existing, yet limited, literature on the influence of ownership concentration and family control on the demands for high-quality audits. This study focusses on an emerging market, namely, Indonesia, where ownership concentration and family control are relatively higher than those in developed markets. Design/methodology/approach - – The sample consists of 787 firm-year observations of public firms listed on the Indonesia Stock Exchange. Following prior studies, a firm is considered using a higher quality audit when its external auditor is one of the Big 4 audit firms. Logistic regressions are employed to test research hypotheses. Findings - – Empirical evidence obtained reveals that firms with higher ownership concentration are more likely to hire a Big 4 auditor. Hence, in such firms, high-quality audits are employed to mitigate agency issues. However, when the controlling shareholder is a family, the association between ownership concentration and the demands for high-quality auditors turns negative, implying that family-controlled firms tend to sustain opaqueness gains by hiring lower quality auditors. Originality/value - – Previous empirical studies examining the influence of ownership concentration and family control on auditor choice are relatively limited in the literature and are heavily focussed on developed economies. In addition, the present study is one of the first to investigate the association between family control and auditor choice in the context of a developing economy.

Suggested Citation

  • Salim Darmadi, 2016. "Ownership concentration, family control, and auditor choice," Asian Review of Accounting, Emerald Group Publishing Limited, vol. 24(1), pages 19-42, February.
    • Handle: RePEc:eme:arapps:v:24:y:2016:i:1:p:19-42
    DOI: 10.1108/ARA-06-2013-0043
    as

    Download full text from publisher

    File URL: https://www.emerald.com/insight/content/doi/10.1108/ARA-06-2013-0043/full/html?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://www.emerald.com/insight/content/doi/10.1108/ARA-06-2013-0043/full/pdf?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1108/ARA-06-2013-0043?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wil Martens & Prem W. S. Yapa & Maryam Safari, 2020. "The Impact of Financial Statement Comparability on Earnings Management: Evidence from Frontier Markets," IJFS, MDPI, vol. 8(4), pages 1-25, November.
    2. Faisal Shahzad & Ijaz Ur Rehman & Faisal Nawaz & Noman Nawab, 2018. "Does family control explain why corporate social responsibility affects investment efficiency?," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 25(5), pages 880-888, September.
    3. Deaa Al-Deen Al-Sraheen & Raneem Mohammed Saleh & Mohammad Husain Alsmadi, 2019. "Cosmetic Accounting Practices among Jordanian Firms? The Role of Ownership Concentration and Political Influence," Review of Applied Socio-Economic Research, Pro Global Science Association, vol. 17(1), pages 18-25, June.
    4. Mohamed M. El-Dyasty & Ahmed A. Elamer, 2021. "The effect of ownership structure and board characteristics on auditor choice: evidence from Egypt," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 18(4), pages 362-377, December.
    5. 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.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:arapps:v:24:y:2016:i:1:p:19-42. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Emerald Support (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.