The Impact of Corporate Governance on Audit Pricing: Evidence from the Family and Non-family Owned Firms in Bangladesh

Abstract

A significant sum of a company’s expenses is spent on getting the financial statements audited. Widely varying pricing has been seen in this market of Bangladesh. Corporate governance has been attributed to the ownership structure. These two circumstances have necessitated this study which attempts to find out the effects of corporate governance on determination of audit fees from the perspective of family and non-family business.   Evidences have been drawn from a sample of 109 publicly listed companies in Bangladesh We explain the moderation effect of corporate governance on family and non-family firm using GMM model. It was found that in complex business structure, addition of board expertise significantly reduces the audit fees paid by the firms. Also, firms that require complex accounting procedures had a significant negative impact on audit fees when board expertise and audit committee independence were ensured. Corporate governance measures like an increase in female director ratio had a negative impact on audit fees in family-owned firms whereas the fee decreased in such non-family firms. Family owned firms increased the audit fee irrespective of employment of new auditor or continuation of current auditor, whereas the fee had a negative impact in non-family firms irrespective of the auditor’s tenure. Our findings have broad implications for audit markets in emerging nations, where the long-term viability of family businesses is critical to overall economic growth.