Audits, audit quality and signalling mechanisms: concentrated ownership structures

Marianne, Ojo (2013): Audits, audit quality and signalling mechanisms: concentrated ownership structures.

Abstract

Do jurisdictions with concentrated ownership structures require less reliance on audits as corporate governance mechanisms and devices? Why do concentrated ownership structures still prevail in certain jurisdictions which are considered to be “market based corporate governance systems”? More importantly, if failures and causes of recent financial crises are principally attributable to the fact that market based corporate governance mechanisms, such as financial regulators, are not optimally performing their functions, why is the role of audits still paramount in such jurisdictions? These are amongst some of the questions which this paper attempts to address.

The ever increasing growth of institutional investors in jurisdictions – particularly those jurisdictions with predominantly concentrated ownership structures, with their increased stakes in corporate equity, also raises the issue of accountability and the question as regards whether increased accountability is fostered where institutional investors assume a greater role – as opposed to position which exists where increased stake of family holdings (family controlled structures) arises.

• Item Type: MPRA Paper
• Language: English
• Keywords: audit quality; corporate governance; concentrated ownership structures; capital market economies; institutional investors
• Subjects: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit; G - Financial Economics > G3 - Corporate Finance and Governance; K - Law and Economics > K2 - Regulation and Business Law; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M4 - Accounting and Auditing

References

Clarke, T. and dela Rama M., (2008) Fundamentals of Corporate Governance, Sage Publications London, Thousand Oaks CA ISBN 978-1-4129-3589-0

European Commission, (2007) Ownership Rules of Audit Firms and their Consequences For Audit Market Concentration http://ec.europa.eu/internal_market/auditing/docs/market/oxera_report_en.pdf

European Commission, (2010) GREEN PAPER Audit Policy: Lessons from the Crisis http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2010:0561:FIN:EN:PDF

European Commission, (2011) Study on the effects of the implementation of the "acquis" on statutory audits of annual and consolidated accounts including the consequences on the audit market http://ec.europa.eu/internal_market/auditing/reform/

European Commission, Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive 2006/43/EC on statutoryaudits of annual accounts and consolidated accounts http://ec.europa.eu/internal_market/auditing/docs/reform/directive_en.pdf

Goshen, Z. and Hamdani, A., (2013) Concentated Ownership Revisted: The Idiosyncratic Value of Corporate Control

Ojo, M. (2006). General Literature on the Audit Expectations Gap, Journal of Forensic Accounting, Vol. VIII, Nos. 1 & 2, January-December 2007

Ojo, M (2009),Regulating the International Audit Market and the Removal of Barriers to Entry: The Provision of Non Audit Services by Audit Firms and the 2006 Statutory Audit Directive(November 2009) Published in European Public Law Journal (December 2009) and Regulation of Financial Institutions Journal CMBO (December 2009)

Tysiac, K. „Europe Takes Step Toward Mandatory Audit Firm Rotation“, Journal of Accountancy April 2013 http://www.journalofaccountancy.com/news/20137862.htm