Does Corporate Governance Influence Auditor Choice in an Emerging Economy?

An Empirical Evidence

Abstract

Purpose: This study examines how corporate governance mechanisms influence the selection of Big 4 auditors, with a particular focus on the moderating role of ownership structure. Specifically, it compares family and non-family firms to determine whether governance characteristics affect auditor choice differently across these two types of firms.

Method: Using panel data from 109 manufacturing firms listed on the Dhaka Stock Exchange between 2013 and 2019 (681 firm-year observations), the study employs logistic regression analysis to investigate the determinants of Big4 auditor selection.

Result: The findings reveal that board size is positively associated with the likelihood of engaging a Big4 auditor. In contrast, the frequency of board meetings shows a consistent negative association across both family and non-family firms. Sub-sample analyses reveal that in non-family firms, board size, audit committee size, and audit committee meeting frequency are positively associated with the choice of a Big 4 auditor. In contrast, for family firms, board gender diversity has a positive effect, whereas audit committee size and meeting frequency are negatively associated with the likelihood of selecting a Big 4 auditor.

Implications: These results suggest that ownership structure significantly moderates the relationship between governance variables and auditor choice. The study provides novel evidence from an emerging economy, offering insights for policymakers, regulators, and corporate stakeholders aiming to enhance audit quality and corporate transparency through tailored governance reforms.