Auditors and the Principal-Principal Agency Conflict in Family-Controlled Firms

Forthcoming in Auditing: A Journal of Practice & Theory

47 Pages Posted: 8 Jun 2020

See all articles by Chiraz Ben Ali

Chiraz Ben Ali

IPAG Business School

Sabri Boubaker

Ecole de Management de Normandie

Michel Magnan

Concordia University - Department of Accountancy

Date Written: May 30, 2020

Abstract

This paper examines whether multiple large shareholders (MLS) affect audit fees in firms where the largest controlling shareholder (LCS) is a family. Results show that there is a negative relationship between audit fees and the presence, number, and voting power of MLS. This is consistent with the view that auditors consider MLS as playing a monitoring role over the LCS, mitigating the potential for expropriation by the LCS. Therefore, our evidence suggests that auditors reduce their audit risk assessment and audit effort and ultimately audit fees in family-controlled firms with MLS.

Keywords: Multiple large shareholders; Private benefits of control; Corporate governance; Audit fees.

JEL Classification: G32; G34; M42; D86

Suggested Citation

Ben Ali, Chiraz and Boubaker, Sabri and Magnan, Michel, Auditors and the Principal-Principal Agency Conflict in Family-Controlled Firms (May 30, 2020). Forthcoming in Auditing: A Journal of Practice & Theory, Available at SSRN: https://ssrn.com/abstract=3614168

Chiraz Ben Ali

IPAG Business School ( email )

184 BD Saint Germain
Paris, 75006
France

Sabri Boubaker (Contact Author)

Ecole de Management de Normandie ( email )

9 rue Claude Bloch
Le Havre Cedex, Cedex 4 14052 Caen
France

HOME PAGE: http://https://www.em-normandie.com/en/sabri-boubaker

Michel Magnan

Concordia University - Department of Accountancy ( email )

Montreal, Quebec H3G 1M8
Canada

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