TY - JOUR
T1 - Corporate ethics and auditor choice - international evidence
AU - Houqe, Muhammad Nurul
AU - van Zijl, Tony
AU - Dunstan, Keitha
AU - Karim, A. K M Waresul
PY - 2015/4/1
Y1 - 2015/4/1
N2 - This paper examines whether firms' auditor choice reflects the strength of corporate ethics. Based on a sample of 132,853 firm year observations from forty-six countries around the globe during the period from 1998 to 2007 and controlling for a number of firm- and country-level factors, we find that firms in countries where "high corporate ethical values" prevail are more likely to hire a Big 4 auditor. We also find that the positive effect of home country corporate ethical values on the likelihood of hiring a high-quality auditor is reinforced by the extent of the firm's board size. These results establish an indirect link between corporate ethics and financial reporting quality through the firms' choice of auditor.
AB - This paper examines whether firms' auditor choice reflects the strength of corporate ethics. Based on a sample of 132,853 firm year observations from forty-six countries around the globe during the period from 1998 to 2007 and controlling for a number of firm- and country-level factors, we find that firms in countries where "high corporate ethical values" prevail are more likely to hire a Big 4 auditor. We also find that the positive effect of home country corporate ethical values on the likelihood of hiring a high-quality auditor is reinforced by the extent of the firm's board size. These results establish an indirect link between corporate ethics and financial reporting quality through the firms' choice of auditor.
UR - http://www.scopus.com/inward/record.url?scp=84928420637&partnerID=8YFLogxK
U2 - 10.1016/j.racreg.2015.03.007
DO - 10.1016/j.racreg.2015.03.007
M3 - Article
AN - SCOPUS:84928420637
SN - 1052-0457
VL - 27
SP - 57
EP - 65
JO - Research in Accounting Regulation
JF - Research in Accounting Regulation
IS - 1
ER -