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Impact of board ownership,CEO-Chair duality and foreignequity participation on auditorquality choice of IPO companiesEvidence from an emerging marketA.K.M. Waresul KarimSchool of Economics and Business Administration,Saint Mary’s College of California, Moraga, California, USATony van ZijlSchool of Accounting and Commercial Law, Victoria University of Wellington,Wellington, New Zealand, andSabur MollahSchool of Business, Stockholm University, Stockholm, SwedenAbstractPurpose– The purpose of this paper is to examine the impact of corporate governance on auditorquality choice by IPO companies in an emerging market setting. It seeks to identify whether efficiencyor opportunism is the driving force behind the choice of auditors in Bangladeshi firms going public.We try to see whether ownership concentration in the hands of a owner-CEO wins over foreignshareholders in the contest of ensuring financial reporting quality.Design/methodology/approach– Multivariate analysis has been carried out on all IPOs madeduring 1990 to 2005 whose financial statements were available. Logistic regression tool has been used toidentify client’s corporate governance attributes affect their choice of auditors. In total, three corporategovernance attributes – CEO-Chair duality, retained ownership, and foreign equity participation –were used to test the impact of ownership structure on auditor choice.Findings– Our findings from logistic regression suggest that CEO-Chair duality and the degree offoreign equity participation are significant determinants of auditor choice while proportion of boardownership is not. In addition, issuer size and whether the issuer is a green field operation also influenceauditor choice while the length of a firm’s operating history does not seem to matter. The findingssupport agency theory prediction that (at least one category of) principals (foreign shareholders in thiscase), are likely to trade-off higher monitoring costs (of hiring a higher quality auditor) with agencycosts arising from asymmetric information, primarily borne by absentee owners.Originality/value– Theworkisbasedonempiricaldatadirectlyfromcompanyfinancialstatements. It uses audited financial statements and makes objective analysis of auditor choicedynamics in a frontier market that demonstrated significant growth of IPO activity in recent years.KeywordsAuditing, Auditors, Accounting, Bangladesh, Initial public offering, Corporate governance,Auditor choicePaper typeResearch paperThe current issue and full text archive of this journal is available atJEL classification– G32, G15Received 15 July 2011Revised 12 January 201217 March 20128 June 2012Accepted 17 July 2012International Journal of Accountingand Information ManagementVol. 21 No. 2, 2013pp. 148-169qEmerald Group Publishing Limited1834-7649DOI 10.1108/18347641311312285IJAIM21,2148
1. IntroductionWe extend the empirical literature on the link between corporate governance and auditor

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