The effects of managerial shareholding on audit fees: Evidence from Hong Kong

Zhijun LIN*, Ming LIU

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

11 Citations (Scopus)

Abstract

This study investigates how managerial shareholding affects audit pricing for listed companies in Hong Kong. Based on agency theory, we examine the relationship between managerial shareholding and audit fees, from the perspectives of the alignment effect and the entrenchment effect. We posit a non-linear relationship, which is tested by grouping sample firms into three levels of managerial shareholding: low, intermediate, and high regions of management ownership. The empirical results reveal that the association of managerial ownership with audit fees is non-linear: managerial shareholding is significantly and negatively associated with audit fees in the low and high regions of managerial ownership, whereas the association is significantly positive in the intermediate region. These correlations are further confirmed by the results of curvilinear regression analysis.

Original languageEnglish
Pages (from-to)227-245
Number of pages19
JournalInternational Journal of Auditing
Volume17
Issue number3
DOIs
Publication statusPublished - Nov 2013

Scopus Subject Areas

  • Accounting
  • Economics, Econometrics and Finance(all)

User-Defined Keywords

  • Audit pricing decision
  • Corporate governance
  • Divergence-of-interests effect
  • Entrenchment effect
  • Managerial shareholding (ownership)

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