Institutional Monitoring, Political Connections and Audit Fees: Evidence from Malaysian Firms

13 Pages Posted: 12 Jun 2017

See all articles by Tee Ming

Tee Ming

Monash University - School of Business and Information Technology

Ferdinand A. Gul

Monash University Sunway Campus

Yee-Boon Foo

Monash University Malaysia

Teh Chee Ghee

Monash University Malaysia

Date Written: July 2017

Abstract

This study employs data on Malaysian firms from 2003 to 2011 to show that ownership by institutional investors is positively associated with audit fees, and this positive association is stronger for firms that are politically connected to the Malaysian government. The results of this study are aligned with the theories that institutional investors can play an effective monitoring role by demanding higher audit quality, particularly if their investee firms are politically connected. Additional tests reveal that the main results are largely driven by foreign institutional investors, while it is insignificant for local institutional investors. Therefore, our evidence suggests that institutional investors, particularly foreign institutions, demand increased audit effort (proxied by audit fees) as a method to monitor politically connected firms.

Keywords: Institutional ownership, institutional domiciles, political connections, audit fees

Suggested Citation

Ming, Tee and Gul, Ferdinand A. and Foo, Yee-Boon and Chee Ghee, Teh, Institutional Monitoring, Political Connections and Audit Fees: Evidence from Malaysian Firms (July 2017). International Journal of Auditing, Vol. 21, Issue 2, pp. 164-176, 2017, Available at SSRN: https://ssrn.com/abstract=2984036 or http://dx.doi.org/10.1111/ijau.12086

Tee Ming (Contact Author)

Monash University - School of Business and Information Technology ( email )

Level 4, Building 6
Jalan Lagoon Selatan
Selangor Darul Ehsan 46150
Malaysia

Ferdinand A. Gul

Monash University Sunway Campus ( email )

Jalan Lagoon Selatan
Selangor Darul Ehsan
Bandar Sunway, 46150
Malaysia

Yee-Boon Foo

Monash University Malaysia ( email )

Jalan Lagoon Selatan
Selangor Darul Ehsan
Bandar Sunway, 46150
Malaysia

Teh Chee Ghee

Monash University Malaysia ( email )

Jalan Lagoon Selatan
Selangor Darul Ehsan
Selangor, 46150
Malaysia
+60355145892 (Phone)
+60355146194 (Fax)

HOME PAGE: http://www.monash.edu.my

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