The association between institutional ownership and audit properties

Han, Soongsoo; Kang, Tony; Rees, Lynn L.

doi:10.1080/16081625.2012.748449

Cited by 27 publications

(11 citation statements)

References 41 publications

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“…The results are in coincidence with Potter (1992)'s assertion that dedicated institutional owners mitigate pressures for myopic investment behavior because their holdings provide tendencies to monitor top managers. The findings are also consistent with prior research works who report that dedicated institutional investors (Koh, 2007) and are more likely to demand higher quality audits (Han et al, 2013).…”

Section: Additional Analysis and Robustness Tests 51 Additional Analy...supporting

confidence: 91%

Risk committee and stock price crash risk in the Malaysian financial sector: the moderating role of institutional ownership

Al‐Dhamari

Nor

Farooque

et al. 2022

JAEE

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PurposeThe authors empirically investigate the impact of the existence of a stand-alone risk committee (RC) and its characteristics on the likelihood of stock price crash risk in listed financial firms on the Bursa Malaysia. The authors also test whether the effect of RC on crash risk is attenuating or amplifying by the level of institutional ownership.Design/methodology/approachThe authors use a principal components analysis (PCA) to aggregate and derive a factor score for risk committee characteristics (i.e. independence, qualification, and size) as a proxy for the effectiveness of RC. The study also employs two distinct stock price crash risk measurements to corroborate the findings and partition institutional ownership into dedicated and transient to examine the potential impact of institutional shareholding on RC-stock price crash risk association.FindingsRegression analysis reveals that only RC qualification has a significant negative impact on stock price crash risk. However, when RC characteristics are aggregated into one composite factor, the authors find that firms with effective RCs exhibit lower risk of stock price crash. The authors also find that firms with high level of institutional shareholdings and effective RCs are less likely to experience crash risk likelihood. The additional analyses indicate that the complementary moderating effect of institutional ownership on RC-crash risk nexus is likely to be driven by dedicated institutional ownership. The results are robust across two measures of stock price crash risk and regression specifications for a longer run window.Originality/valueThe study, to the best of the researchers' knowledge, is the first to provide evidence in an emerging market financial sector companies' perspective suggesting that effective RCs are individually and aggregately associated with lower stock price crash risk, which is further strengthened by dedicated institutional investors. These findings are unique and contribute to a small but growing body of literature documenting the need for effective RCs and specific institutional investors and their consequences of improvements in stock price crash risk environment. Results of our research in this area provide important insights to financial and capital market participants, investors, regulators, and policymakers in Malaysia.

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Section: Additional Analysis and Robustness Tests 51 Additional Analy...supporting

confidence: 91%

Risk committee and stock price crash risk in the Malaysian financial sector: the moderating role of institutional ownership

Al‐Dhamari

Nor

Farooque

et al. 2022

JAEE

View full text Add to dashboard Cite

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“…Following the literature (e.g. Abbott et al, 2006;Ashbaugh et al, 2003;Ball et al, 2012;Craswell et al, 1995;George et al, 2013;Gotti et al, 2012;Han et al, 2013;Kim et al, 2012;LaFond & Watts, 2008;Simon & Francis, 1988;Simunic, 1980), we include Size, Big4Auditor, MB, Analyst and Institution in our model as the control variables. Size is measured as the natural logarithm of the firm's total assets at the beginning of the fiscal year.…”

Section: Methodsmentioning

confidence: 99%

Management earnings forecasts disaggregation and audit fees: International evidence

2021

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In this study, using a large sample of firms from 27 countries around the world, we examine the relationship between disaggregated earnings forecasts and audit fees. We find that the positive association between management earnings forecasts and audit fees in prior studies is primarily driven by firms issuing management forecasts that contain disaggregated performance measures. We further find that better developed country‐level institutions can weaken the positive relation between disaggregated earnings forecasts and audit fees. Taken together, our findings support the important role of disaggregated earnings forecasts in signalling the credibility of prospective financial information provided by firms and shed light on the debate over the positive association between management earnings forecasts and audit fees.

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“…Using a unique institutional background of the B‐share stock market in China, He, Rui, Zheng, and Zhu () explored the impact of foreign investors on auditor choice and documented that firms experiencing greater declines in foreign ownership are more likely to switch to non‐Big 4 auditors . Han, Kang, and Rees () found that firms are more likely to hire a Big 4 auditor when long‐term institutional ownership is high.…”

Section: Determinants Of Auditor Choicementioning

confidence: 99%

Determinants of auditor choice: Review of the empirical literature

Habib

Bhuiyan

et al. 2019

Int J Auditing

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We synthesize the empirical archival literature on the determinants of auditor choice in an international setting, critique the findings, and offer suggestions for future research. We categorize the determinants into (i) firm‐level ownership variables, (ii) nonownership corporate governance determinants, (iii) economic determinants driven by the risk of information asymmetry, and (iv) country‐level institutional determinants, including legal protection of investors, political connections, and national culture. Our comprehensive review not only enriches the academic literature, but also provides material of considerable interest to investors, practitioners (auditors), and regulators.

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The association between institutional ownership and audit properties

Cited by 27 publications

References 41 publications

Risk committee and stock price crash risk in the Malaysian financial sector: the moderating role of institutional ownership

Risk committee and stock price crash risk in the Malaysian financial sector: the moderating role of institutional ownership

Management earnings forecasts disaggregation and audit fees: International evidence

Determinants of auditor choice: Review of the empirical literature

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