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Board members' outside directorships and the demand for audit quality: Large sample evidence from private firms
Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Business Administration.ORCID iD: 0000-0001-5804-9454
2025 (English)In: Journal of Accounting, Auditing and Finance, ISSN 0148-558X, E-ISSN 2160-4061, Vol. 40, no 2, p. 613-638Article in journal (Refereed) Published
Abstract [en]

Board members with multiple directorships develop reputational capital as decision experts. Prior studies based on public firms suggest that such directors would use higher quality auditors to improve the quality of financial reporting and, thereby, protect their reputational capital. This study is the first large-scale study that investigates whether multiple directorships influence auditor choice in the setting of private firms. The result indicates a significant positive association between the proportion of board members with outside directorships and audit quality. Furthermore, it shows that the propensity to hire a higher quality auditor is significantly influenced by directors’ network. Finally, the results indicate that the incentives to invest in higher quality auditors are largely influenced by the size of the companies in which board members have their outside directorships.

Place, publisher, year, edition, pages
Sage Publications, 2025. Vol. 40, no 2, p. 613-638
Keywords [en]
board structure, multiple directorship, auditor choice, audit quality, board network, private firms
National Category
Business Administration
Research subject
Business Studies
Identifiers
URN: urn:nbn:se:umu:diva-212437DOI: 10.1177/0148558X231183758ISI: 001037140000001Scopus ID: 2-s2.0-85166002526OAI: oai:DiVA.org:umu-212437DiVA, id: diva2:1784574
Funder
The Jan Wallander and Tom Hedelius Foundation, W18-0023Available from: 2023-07-27 Created: 2023-07-27 Last updated: 2025-04-15Bibliographically approved

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Alexeyeva, Irina

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