Financial Characteristics of Companies Audited by Large Audit Firms

ICESAL - 9th International Conference on Enterprise Systems, Accounting and Logistics, Research Development Session Abstracts, Chania, Crete, Greece, 3-5 June 2012, pp. 12

22 Pages Posted: 24 Nov 2012 Last revised: 29 Apr 2013

See all articles by Marinos Mastorakis

Marinos Mastorakis

Hellenic Mediterranean University - Department of Accounting; Panteion University of Athens - Department of Public Administration

Costas Siriopoulos

Zayed University, College of Business; University of Patras - Business Administration

Stavros Arvanitis

Hellenic Mediterranean University

Date Written: November 23, 2012

Abstract

Purpose – The purpose of this paper is to examine how financial characteristics associated with the choice of a big audit firm with further investigation on the agency costs of free cash flows.

Design/methodology/approach – The sample used for this work includes industrial listed companies from Germany and France. To test our hypothesis, we used a number of logit models, extending the standard model selection audit firm, to include the variables of interest. Following previous work, our dependent dummy variable is Big4 or non-Big4.

Findings – We observed that most independent variables in the German companies show similar results to previous work, but we did not have the same results for the French industry. Moreover, our findings suggest that the total debt and dividends can be an important reason for determining the choice of a large audit firm, reducing agency costs of free cash flows.

Research limitations/implications – This study has some limitations on the measurements of the cost of the audit fees and also generates opportunities for additional searching.

Originality/value – The paper provides only one aspect to explain the relationship between the problems of agency costs of free cash flow and influence in choosing a large auditing firm, which stems from investors’ demand for higher quality audits.

Keywords: audit pricing, agency conflicts, free cash flows, debt monitoring, growth opportunities

JEL Classification: C30, L80, M40, M41

Suggested Citation

Mastorakis, Marinos and Siriopoulos, Costas and Arvanitis, Stavros, Financial Characteristics of Companies Audited by Large Audit Firms (November 23, 2012). ICESAL - 9th International Conference on Enterprise Systems, Accounting and Logistics, Research Development Session Abstracts, Chania, Crete, Greece, 3-5 June 2012, pp. 12, Available at SSRN: https://ssrn.com/abstract=2179910 or http://dx.doi.org/10.2139/ssrn.2179910

Marinos Mastorakis

Hellenic Mediterranean University - Department of Accounting ( email )

Crete, Agios Nikolaos GR-72100
Greece

Panteion University of Athens - Department of Public Administration ( email )

136st Syngrou
Athens 117 45
Greece

Costas Siriopoulos (Contact Author)

Zayed University, College of Business ( email )

P.O. Box 144534
Abu Dhabi
United Arab Emirates

University of Patras - Business Administration ( email )

Patras
Greece

Stavros Arvanitis

Hellenic Mediterranean University ( email )

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