Dual–Class Ownership Structure and Audit Fees

14 Pages Posted: 23 May 2020

See all articles by Olesya Lobanova

Olesya Lobanova

affiliation not provided to SSRN

Suchi Mishra

Florida International University (FIU) - Department of Finance

Kannan Raghunandan

American Real Estate Society - Florida International University

Alexandre Aidov

Florida International University (FIU)

Date Written: March 2020

Abstract

A dual‐class share structure creates a separation between cash flow rights and voting rights. Dual‐class firms impact audit fees through their effect on supply/demand for auditing. This article examines the association between audit fees and dual‐class share structure for U.S. public firms. We find that a dual‐class share structure is associated with lower audit fees compared to single‐class firms. Further, within dual‐class firms, we find that the divergence between cash flow rights and voting rights is negatively associated with audit fees. The results are consistent with the managerial incentive‐alignment effect and/or the insulation effect of a dual‐class share structure on the supply/demand for audit services. This study highlights that the ownership structure of a firm constitutes an important role in audit pricing.

Keywords: Agency Theory, Audit Fees, Corporate Governance

Suggested Citation

Lobanova, Olesya and Mishra, Suchismita and Raghunandan, Kannan and Aidov, Alexandre, Dual–Class Ownership Structure and Audit Fees (March 2020). International Journal of Auditing, Vol. 24, Issue 1, pp. 163-176, 2020, Available at SSRN: https://ssrn.com/abstract=3602861 or http://dx.doi.org/10.1111/ijau.12185

Olesya Lobanova (Contact Author)

affiliation not provided to SSRN

No Address Available

Suchismita Mishra

Florida International University (FIU) - Department of Finance ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

Kannan Raghunandan

American Real Estate Society - Florida International University

1101 Brickell Ave Ste 1100S
Miami, FL 33131-3113
United States

Alexandre Aidov

Florida International University (FIU) ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

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