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Dual–class ownership structure and audit fees
Author(s) -
Lobanova Olesya,
Mishra Suchismita,
Raghunandan Kannan,
Aidov Alexandre
Publication year - 2020
Publication title -
international journal of auditing
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.583
H-Index - 21
eISSN - 1099-1123
pISSN - 1090-6738
DOI - 10.1111/ijau.12185
Subject(s) - business , audit , voting , accounting , dual (grammatical number) , joint audit , cash flow , incentive , finance , internal audit , economics , microeconomics , law , art , literature , politics , political science
A dual‐class share structure creates a separation between cash flow rights and voting rights. Dual‐class firms impact audit fees through their effect on supply/demand for auditing. This article examines the association between audit fees and dual‐class share structure for U.S. public firms. We find that a dual‐class share structure is associated with lower audit fees compared to single‐class firms. Further, within dual‐class firms, we find that the divergence between cash flow rights and voting rights is negatively associated with audit fees. The results are consistent with the managerial incentive‐alignment effect and/or the insulation effect of a dual‐class share structure on the supply/demand for audit services. This study highlights that the ownership structure of a firm constitutes an important role in audit pricing.