Culture and Auditor Choice: A Test of the Secrecy Hypothesis
University of Toronto - Rotman School of Management
Oklahoma State University - School of Accounting
Wayne B. Thomas
University of Oklahoma - Michael F. Price College of Business
Yong Keun Yoo
Korea University Business School
Journal of Accounting and Public Policy, Forthcoming
The purpose of this study is to investigate whether firms' auditor choice relates to national culture. We construct a novel measure of secretiveness based on Hofstede's (1980) cultural factors. Using a very large sample of firms from 37 countries and controlling for a number of firm- and country-level factors, we find that firms in more secretive countries are less likely to hire a Big 4 auditor. We also document that the relation between secrecy dimension of national culture and auditor choice is mitigated by the firms' degree of internationalization. These results establish a link between national culture and financial reporting quality through the firm's choice of auditor.
Keywords: Culture, Secrecy, Auditor Quality, International
JEL Classification: F23, G15, M49, M41, M44, M47Accepted Paper Series
Date posted: February 26, 2008
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