Does the Informal Hierarchy of Independent Directors Affect Auditor's Choice?

MA Dong-shan; WANG Cui-fang; ZHANG Sheng-qiang

Volume 35 Issue 3

May 2021

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MA Dong-shan, WANG Cui-fang, ZHANG Sheng-qiang. Does the Informal Hierarchy of Independent Directors Affect Auditor's Choice?[J]. Journal of Guangdong University of Finance & Economics, 2020, 35(3): 84-97.

Citation:

MA Dong-shan, WANG Cui-fang, ZHANG Sheng-qiang. Does the Informal Hierarchy of Independent Directors Affect Auditor's Choice?[J]. Journal of Guangdong University of Finance & Economics, 2020, 35(3): 84-97.

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Does the Informal Hierarchy of Independent Directors Affect Auditor's Choice?

Liaoning University, Shenyang 110136, China

Received Date: 2019-12-09
Available Online: 2021-05-13
Publish Date: 2020-06-28

Abstract

Abstract

Based on the sample of A-share listed companies from 2008 to 2017, this paper investigates the impact of the informal hierarchy of independent directors on the auditor's decisions. It is found that the higher the clarity of the informal hierarchy of independent directors is, the more likely they are to choose high-quality auditors, and this effect is more significant in the sample of enterprises with high performance pressure and non-state-owned enterprises. Furthermore, grouping tests based on agency costs show that the informal hierarchy of independent directors plays a significant role in the enterprises with low agency cost, and not significant in the enterprises with high agency cost, indicating that the behavior of management and major shareholders will inhibit corporate governance of informal hierarchy of independent directors. The results reveal to a certain extent the influence of the hierarchical order of independent directors' team on the auditor's choice, enrich the relevant research on the influence of independent directors' behavior on the enterprise decision-making, and provide empirical evidences for enterprises to improve the structure of independent directors, promote the choice of high-quality auditors and perfect corporate governance.
- independent directors,
- auditor,
- informal hierarchy,
- hierarchical order,
- agency cost,
- auditor's choice,
- enterprise decision

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References(41)

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