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Institutional monitoring, political connections and audit fees: evidence from Malaysian firms

journal contribution
posted on 2017-07-01, 00:00 authored by C M Tee, Ferdinand Gul, Y B Foo, C G Teh
This study employs data on Malaysian firms from 2003 to 2011 to show that ownership by institutional investors is positively associated with audit fees, and this positive association is stronger for firms that are politically connected to the Malaysian government. The results of this study are aligned with the theories that institutional investors can play an effective monitoring role by demanding higher audit quality, particularly if their investee firms are politically connected. Additional tests reveal that the main results are largely driven by foreign institutional investors, while it is insignificant for local institutional investors. Therefore, our evidence suggests that institutional investors, particularly foreign institutions, demand increased audit effort (proxied by audit fees) as a method to monitor politically connected firms.

History

Journal

International journal of auditing

Volume

21

Issue

2

Pagination

164 - 176

Publisher

Wiley

Location

Chichester, Eng.

ISSN

1090-6738

eISSN

1099-1123

Language

eng

Publication classification

C1 Refereed article in a scholarly journal; C Journal article

Copyright notice

2017, John Wiley & Sons Ltd.