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SSRN Electronic Journal

DOI: 10.2139/ssrn.1923222

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Family Firms and Auditor Choice: A Focus on IPO Firms

Journal article published in 2011 by Chun Keung (Stan) Hoi, Ashok Robin, Mithu Dey
This paper is available in a repository.
This paper is available in a repository.

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Preprint: policy unknown
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Postprint: policy unknown
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Published version: policy unknown

Abstract

We examine whether family firms are more likely to use Big 4 auditors compared to non-family firms. The literature indicates two perspectives. On the one hand, Big 4 auditors can alleviate problems of information asymmetry. On the other hand, Big 4 auditors can constrain insiders in their pursuit of private gains. We find that family firms are less likely to use Big 4 auditors. This supports the second perspective. We also find that our result is sensitive to the definition of family. We consider two definitions in our study: a family-centric one (two or more insiders are family members or affiliates) and a founder-centric one (founder or member of founding family is an insider). Our result is robust only if we use the family-centric definition.