Auditors' Governance Functions and Legal Environments: An International Investigation
CONTEMPORARY ACCOUNTING RESEARCH(2007)
摘要
This paper uses firm-level data collected from 39 countries to study whether national legal environments increase or decrease auditors' governance functions in serving the bonding and signaling role. On the one hand, Big 5 auditors may play a stronger governance role in weaker legal environments because they are good substitutes for legal protection of outside investors and risky firms find Big 5 auditors more affordable because of lower litigation costs. On the other hand, a country's poor legal environment may significantly weaken the demand for and supply of quality audits, lessening their role as a bonding mechanism and a credible signaling mechanism. Our empirical results provide support for the former view that Big 5 auditors fulfill a stronger governance function in weaker legal environments.
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关键词
auditor choice,corporate governance,legal environments,litigation costs
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