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Role of auditor in agency conflict and corporate governance: Empirical analyses of Taiwanese firms

Chia-Ching Cho (Department of Accounting and Information Technology, College of Management, National Chung Cheng University, Chia-yi, Taiwan, and)
Chu-Hua Wu (Department of Finance, College of Management, Yuan Ze University, Zhongli, Taiwan)

Chinese Management Studies

ISSN: 1750-614X

Article publication date: 29 July 2014

1593

Abstract

Purpose

The purpose of this study is to investigate whether hiring a high-quality auditor (i.e. industry specialist) depends on corporate governance indicators after controlling a different level of agency conflicts (ACs).

Design/methodology/approach

This paper uses logistic regressions on 12,449 firm-year samples of Taiwanese public companies from 1998 to 2011 by grouping the samples into three categories (i.e. low, medium and high AC).

Findings

The results show that the corporate governance indicators can explain the decision of auditor selection only in low and medium AC groups, which suggest that there may be a complementary relationship between external (i.e. auditors) and internal governance when the ACs are mild.

Originality/value

The paper contributes to the ongoing debate between the complementary and substitutable effects. When the internal ACs are controlled, the internal governance and auditor selection are complemented.

Keywords

Citation

Cho, C.-C. and Wu, C.-H. (2014), "Role of auditor in agency conflict and corporate governance: Empirical analyses of Taiwanese firms", Chinese Management Studies, Vol. 8 No. 3, pp. 333-353. https://doi.org/10.1108/CMS-09-2012-0126

Publisher

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Emerald Group Publishing Limited

Copyright © 2014, Emerald Group Publishing Limited

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