Author:
Abdulmalik Salau Olarinoye,Amran Noor Afza,Che-Ahmad Ayoib
Abstract
Purpose
This study aims to examine the unique nature of family firms by investigating the moderating effect of chief executive officer (CEO) identity on CEO career horizon and the auditor’s client risk assessment. Consistent with literature on family businesses, the level of CEO attachment to socio-emotional wealth (SEW) varies among family businesses.
Design/methodology/approach
This study used a longitudinal sample of 2,063 non-financial family firm-year observations from 2005 to 2016 listed on the Bursa Malaysia. The study used the general method of moments (GMM), which controls for endogeneity concerns.
Findings
The results reveal that, without the moderating effect of CEO identity, the relationship between CEO career horizon and auditor’s risk assessment is positive, which suggests that the auditor’s risk perception of retiring CEOs is very high. However, the interaction of CEO identity reverses the relationship as evidenced by the negative and significant coefficient on the interacted terms. The finding suggests that the auditor’s perceived risk associated with CEO career horizon is lower in family firms with CEOs affiliated to family members or in which the CEO has an equity stake. Overall, the findings provide compelling evidence that the extent of the CEO’s attachment to the firm’s SEW affects the auditor’s client risk assessment.
Practical implications
The findings of the study serve as an enlightenment to policymakers such as Bursa Malaysia and Security Commission that within the family-controlled firms, differences still exist; therefore, there might be a need for future regulatory initiative to cater for the specific need of family-controlled firms.
Originality/value
The study contributes to prior literature by departing from the agency theory adopted in previous studies on auditor choice in family firms under the assumption that family firms are homogenous.
Subject
Economics, Econometrics and Finance (miscellaneous),Accounting,Management Information Systems
Reference49 articles.
1. Audit fees, corporate governance mechanisms, and financial reporting quality in Nigeria;DLSU Business and Economics Review,2016
2. Auditor tolerance of accrual-based and real earnings management in boardrooms of politically connected Nigerian firms;Asian Journal of Accounting and Governance,2017
3. Regulatory changes and reporting quality: the moderating role of firm characteristics;Problems and Perspectives in Management,2019
4. Political connections of boards and the selection of auditors in Nigeria;International Journal of Economics and Financial Issues,2016
5. CEO tenure and earnings management;Journal of Accounting and Economics,2015
Cited by
4 articles.
订阅此论文施引文献
订阅此论文施引文献,注册后可以免费订阅5篇论文的施引文献,订阅后可以查看论文全部施引文献