Auditors and the Principal-Principal Agency Conflict in Family Controlled Firms

Photo : Auditors and the Principal-Principal Agency Conflict in Family Controlled Firms

Family firms are widespread among public companies in France. In a recent paper, Ben Ali, Boubaker & Magnan, provide evidence that the presence of multiple large shareholders (MLS) beyond the largest controlling shareholder (LCS) mitigates the agency conflicts between large and minority shareholders, hence reducing the level of audit fees paid by family-controlled firms.

Using a sample of listed family-controlled firms in France over 2003–2013, their findings support the idea that auditors view MLS as performing a monitoring role over the controlling family, mitigating the potential for the extraction of private benefits by the LCS. More specifically, it appears that auditors expect MLS to mitigate the likelihood that LCS diverts corporate resources to the detriment of non-controlling shareholders.

By performing such a monitoring role, MLS reduce auditors’ risk exposure and, ultimately, lead them to reduce their efforts and fees. Auditors’ reactions to the presence of MLS are hence consistent with ISA 315 which requires auditors to assess the risks of financial misreporting through a better understanding of the entity being audited, especially in terms of its ownership and governance processes. 

The research of Chiraz Ben Ali, Sabri Boubaker & Michel Magnan.

Author(s)
  • Photo :

    Sabri Boubaker Sabri Boubaker is a Professor of Finance. He joined EM Normandie in 2019. He has a PhD from the l'Université Paris-Est, awarded in 2006 and an accreditation to supervise research (HDR) from the same university, awarded in 2010. His research interests are the ownership structure and control of listed companies. Sabri Boubaker has published many academic papers (+80 papers) in international journals. He is co-founder and co-chair of the annual Paris Financial Management Conference (2013) and the Vietnam Symposium in Banking and Finance (VSBF) series (2016). He is also the President of the International Society for the Advancement of Financial Economics (ISAFE).

Photo : Do CEO overconfidence and narcissism affect corporate social responsibility in the UK listed companies?

Do CEO overconfidence and narcissism affect corporate social responsibility in the UK listed companies?

Purpose This paper aims to examine the effect of two CEO characteristics, namely, narcissism and overconfidence on corporate social responsibility (CSR) and the moderating effect of corporate governance (CG) mechanisms in the UK. Design/methodology/approach Using a sample of 2,360 UK firms listed on the FTSE 400 index for the years 2010–2017, the feasible generalized least […]

Read More

Photo : Cultural identity and its impact on today’s multicultural organizations

Cultural identity and its impact on today’s multicultural organizations

Within the context of the internationalization of organizations and, in particular, growing numbers of staff members from different cultures, the number of studies on the management of cultural differences has increased considerably. However, as several authors have observed, studies on cultural differences and the concept of cultural identity remain limited, in large part due to […]

Read More

Photo : Impact of self-leadership and shared leadership on the performance of virtual R&D teams

Impact of self-leadership and shared leadership on the performance of virtual R&D teams

Managing geographically dispersed R&D teams remains a complex task. Contemporary leadership styles in global virtual teams is a pertinent—yet, unexplored—research topic, which can help achieve greater workplace effectiveness. The purpose of this study is to analyze the effects of self and shared leadership on the performance of virtual R&D teams. Trust, potency, and commitment mediate […]

Read More