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Institutional investors, political connection and audit quality in Malaysia

Author

Listed:
  • Effiezal Aswadi Abdul Wahab
  • Mazlina Mat Zain
  • Kieran James
  • Hasnah Haron

Abstract

Purpose - The purpose of this paper is to extend the audit pricing literature by examining whether institutional investors and political connection are associated with higher audit fees. Design/methodology/approach - Both descriptive and multivariate analyses are employed to address the research objectives. In addition, the authors use panel data to control for both heterocedasticity and contemporaneous correlations in each cross‐section. Findings - Based on a panel analysis of 390 Malaysian firms from 1999 to 2003, a positive relationship between institutional ownership and audit fees is found, although the economic impact is minimal. Further, the authors find that audit fees are higher for politically connected firms. Research limitations/implications - A thorough examination on the role of political connection is much warranted to provide a better understanding on such connection influences the audit market. Originality/value - This paper provides an alternative view on the role of political connection, and on how they influence the audit market.

Suggested Citation

  • Effiezal Aswadi Abdul Wahab & Mazlina Mat Zain & Kieran James & Hasnah Haron, 2009. "Institutional investors, political connection and audit quality in Malaysia," Accounting Research Journal, Emerald Group Publishing Limited, vol. 22(2), pages 167-195, September.
    • Handle: RePEc:eme:arjpps:v:22:y:2009:i:2:p:167-195
    DOI: 10.1108/10309610910987501
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    References listed on IDEAS

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    Cited by:

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    2. Abdul Wahab, Effiezal Aswadi & Gist, Willie E. & Nik Abdul Majid, Wan Zurina, 2014. "Characteristics of non-audit services and financial restatements in Malaysia," Journal of Contemporary Accounting and Economics, Elsevier, vol. 10(3), pages 225-247.
    3. Abdul Ghafoor & Rozaimah Zainudin & Nurul Shahnaz Mahdzan, 2019. "Factors Eliciting Corporate Fraud in Emerging Markets: Case of Firms Subject to Enforcement Actions in Malaysia," Journal of Business Ethics, Springer, vol. 160(2), pages 587-608, December.
    4. Nurul Nazlia Jamil, 2020. "The Power of Political Connections: Review on the Impacts of Audit Committee and Corporate Governance," Journal of Public Administration and Governance, Macrothink Institute, vol. 10(1), pages 333347-3333, December.
    5. Abdul Wahab, Nor Shaipah & Ntim, Collins G. & Tye, Wei Ling & Shakil, Mohammad Hassan, 2022. "Book-tax differences and risk: Does shareholder activism matter?," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 48(C).
    6. Nor Farizal Mohammed & Zuraidah Mohd Sanusi & Fahdah Sultan Alsudairi, 2017. "Corporate Governance and Malaysian Politics: Theoretical Framework for Accounting Quality," International Journal of Economics and Financial Issues, Econjournals, vol. 7(2), pages 188-195.
    7. Ling Jong & Poh-Ling Ho, 2018. "Inside the family firms: The impact of family and institutional ownership on executive remuneration," Cogent Economics & Finance, Taylor & Francis Journals, vol. 6(1), pages 1432095-143, January.

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