Mutual supervision or conspiracy? The incentive effect of multiple large shareholders on audit quality requirements |
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| Institution: | 1. School of Business and Management, Shanghai International Studies University, China;2. School of Business, Zhengzhou University, China;1. Department of Mathematics and School of Economics and Management, University of Bologna, Bologna, Italy;2. Department of Economics, Society and Politics, University of Urbino Carlo Bo, Italy;3. Department of Economics, University of Bamberg, Germany;1. Deutsche Börse Senior Professor of Empirical Capital Market Research, University of Hamburg, Germany;2. Faculty of Business Administration, University of Hamburg, Germany;1. Department of Accountancy and Finance at University of Antwerp, Stadscampus Prinsstraat 13 S.B.329, 2000 Antwerpen, Belgium;2. College of Business, University of Akron, Akron, OH, USA;3. School of Accounting and Finance, University of Vaasa, Wolffintie 34, 65200 Vaasa, Finland;4. Department of Data Science, Economics and Finance at EDHEC Business School, 24 avenue Gustave Delory, 59057 Roubaix Cedex 1, France;1. School of Finance, Xinjiang University of Finance and Economics, 449 Middle Beijing Road, Urumqi 830012, PR China;2. Belt & Road Finance Institute, Central University of Finance and Economics, 39 South College Road, Haidian District, Beijing 100081, PR China;3. International Business College, South China Normal University, 55 Zhongshan Road, Tianhe District, Guangzhou 510631, PR China |
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| Abstract: | Multiple large shareholders may choose to mutual supervise or conspire, thereby affecting the firm's strategy and transactional operations. This paper examines the impact of firms with multiple large shareholders on demand for high-quality audits. Compared with firms with a single large shareholder, firms with multiple large shareholders increase audit cost and increase the probability of hiring a Big Four accounting firm. After a series of robustness checks, this result holds. Furthermore, we find that the shareholding ratio of the largest shareholder tends to increase audit cost and increase the probability of hiring the Big Four. The absolute controlling and non-controlling shareholders tend to increase audit cost and increase the probability of hiring the Big Four. The state-owned firms and large firms with multiple large shareholders tend to increase audit cost and increase the probability of hiring the Big Four. This paper helps to enrich the research on external audit supervision and moral hazard research from the perspective of ownership structure. |
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