External monitoring of private firms: A cross-country empirical analysis |
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Affiliation: | 1. Department of Finance, Frank G. Zarb School of Business, Hofstra University, Hempstead, NY 11549, USA;2. Economics and Finance Department, College of Business Administration, University of Texas at El Paso, El Paso, TX 79968-0543, USA;1. University of Richmond, United States;2. Creighton University, United States;3. The American College of Financial Services, United States |
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Abstract: | There is limited research which focuses on the use of external monitoring by private companies, domestic or international. We use World Bank data to explore the factors that are associated with the probability of using external monitoring by private firms in emerging and developing countries. In this research, the service of external auditors is considered as a proxy for external monitoring. We tested our results both on the full sample (114 countries) and on 5 different income clusters based on World Bank economic development categorization. From our results, we conclude that there is not a single set of “universal” factors associated with firms' decision to engage external auditors. We observe that factors associated with external auditors, a proxy for monitoring, differ across the various categories of economic development. As a policy implication, there is a need for a voluntary adoption of a uniform set of standards for external monitoring and auditing in this area. |
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