Blockholder Heterogeneity and Audit Fees: Does Private Information Matter?

We analyze the impact of Small Blockholders' (SBH - with 5% to 10% of voting rights) heterogeneity and their access to private information on the demand for audit services. By promoting enhanced audit services, we expect SBH to have a moderating effect on the relation between Large Blockholders (LBH - more than 10% of voting rights) and audit fees in a context of low shareholder protection. Drawn on Swiss public firm data over the 2002-2019 period, our results show that the presence of SBH flattens the concave relation between ownership concentration and audit fees found in prior studies. This moderating effect is mainly driven by the uninformed SBH, who given their lower - compared with informed SBH - access to private channels of information, are more likely to rely on audited public financial statements. Our findings contribute to the literature on the role of SBH in the company's corporate governance.