The effect of family control on audit fees during financial crisis
ISSN: 0268-6902
Article publication date: 4 March 2020
Issue publication date: 22 April 2020
Abstract
Purpose
The purpose of this study is to empirically examine the effect of family involvement in ownership, management and directorship on audit fees during the crisis and non-crisis periods.
Design/methodology/approach
Following Anderson and Reeb (2003), this paper uses a two-way fixed effect model to examine the impact of family control on audit fees in crisis and non-crisis periods. The fixed effects include dummy variables for each year and each industry code in the sample.
Findings
This paper finds that during normal economic periods, family firms pay lower audit fees relative to non-family firms because of the incentive alignment or monitoring effect. While, during crisis periods, family firms pay higher audit fees because of the shareholder expropriation effect.
Research limitations/implications
The results reported in this paper have both practical and policy implications for the demand and supply of audit services to firms having different ownership structures.
Originality/value
This is the first study of its kind to examine the effect of family ownership and involvement on audit fees during the crisis period.
Keywords
Citation
Al-Okaily, J. (2020), "The effect of family control on audit fees during financial crisis", Managerial Auditing Journal, Vol. 35 No. 5, pp. 645-665. https://doi.org/10.1108/MAJ-12-2018-2114
Publisher
:Emerald Publishing Limited
Copyright © 2020, Emerald Publishing Limited