Audit Fees, Auditor Choice and Stakeholder Influence : Evidence from a Family Firm Dominated Economy

Despite the dominance of family-owned publicly listed companies in developing economies, prior research has paid relatively little attention to this area, and the socio-economic context of these countries has been mostly ignored. This study contributes to the accounting literature by providing empirical evidence of the effects of family control and ownership on audit pricing and auditor choice in a developing economy context. Using 1,058 firm-year observations of publicly listed companies in Bangladesh, where family firms are the most dominant form of public companies, we determine that in comparison with non-family firms, our sample family firms pay significantly lower audit fees and tend to choose lower quality auditors. However, for export oriented industries, family firms seem to pay significantly higher audit fees and recruit better quality auditors compared to non-family firms, indicating stakeholder power. Collectively, our findings have important implications for audit markets in emerging economies in which the sustainability of family firms is crucial for overall economic development