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The effect of ownership structure and board characteristics on auditor choice: evidence from Egypt

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  • Mohamed M. El-Dyasty

    (Mansoura University)

  • Ahmed A. Elamer

    (Mansoura University
    Brunel University London)

Abstract

In this study, we explore the influence of board characteristics and ownership structure on auditor choice decisions in less strictly legal environments, like Egypt. Using a large sample of 899 firm-year observations for the period of 2011 to 2019, we employed logistic and probit regressions. We find that larger boards, institutional ownership, and foreign ownership have a significant and positive association with appointing Big 4 auditors. In contrast, our findings indicate that CEO duality and family ownership are negatively related to Big 4 choice. Our results also show that powerful CEOs (duality) and independent directors are more likely to hire second-tier auditors instead of Big 4, whereas larger board and foreign owners are less likely to hire third-tier auditors. Our results remain robust even after taking audit committee characteristics and endogeneities issues into consideration. Taken together, our research, therefore, provides consistent evidence that different governance and institutional variables can effectively generate economic forces that can support diverging decisions regarding the auditor choice patterns to attenuate agency problems. Our results have important implications for regulators, policymakers, and auditors to understand the drivers of auditor choice and audit market structure.

Suggested Citation

  • 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.
    • Handle: RePEc:pal:ijodag:v:18:y:2021:i:4:d:10.1057_s41310-021-00118-0
    DOI: 10.1057/s41310-021-00118-0
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    Cited by:

    1. Vanessa Carvalho Pereira & Antonio Gualberto Pereira & José Sérgio Casé Oliveira, 2023. "Influence of ownership structure on the choice of Big Four independent auditors," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 20(3), pages 316-326, September.
    2. Sayaf Algrady & Xie Xiaojun, 2022. "Influential Factors Affecting Earnings Management in Public Listed Companies: A Conceptual Model," International Review of Management and Marketing, Econjournals, vol. 12(2), pages 1-10, March.
    3. Mohamed M. El-Dyasty & Ahmed A. Elamer, 2022. "Multiple audit mechanism, audit quality and cost of debt: empirical evidence from a developing country," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 19(3), pages 264-281, September.

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    More about this item

    Keywords

    Corporate governance; Big 4; Auditor choice; Ownership structure; Developing countries; Agency problems;
    All these keywords.

    JEL classification:

    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing

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