Audit Pricing and Nature of Controlling Shareholders : Evidence from France

This study examines whether auditors are employed as a monitoring mechanism to mitigate agency problems arising from different types of controlling shareholders. In a context of ownership concentration and poor investor protection, controlling shareholders can easily expropriate minority shareholders and profit from private benefits of control. However, this agency conflict has been rarely studied, as the most commonly assumed agency conflict resides between managers and shareholders. Using an audit fees model derived from Simunic (1980), we study the impact of the nature of controlling shareholders on audit fees in the French listed firms. Our results show 1) a negative relation between audit fees and governmental shareholding; 2) a positive relation between audit fees and institutional shareholding; 3) no relation between audit fees and family shareholding. These results illustrate the mixed effects of the nature of ownership on audit fees