Title: Dominant shareholders, excess control and audit fees in Canada
Authors: Yves Bozec; Richard Bozec
HEC Montreal, 3000 Chemin de la Côte-Sainte-Catherine, Montréal (Québec) H3T 2A7, Canada
Telfer School of Management, University of Ottawa, 55 Laurier E, Ottawa, Ontario K1N 6N5, Canada
Abstract: Public firms throughout the world tend to be controlled by large shareholders who possess significant control rights in excess of their cash-flow rights (excess control). Extensive evidence suggests that concentrated ownership structures and excess control entail large agency costs. However, little is known about the impact of the presence of dominant shareholders on the pricing of audit fees. The objective of this paper is to address this issue. Using a panel of 242 S&P/TSX Canadian firms over the period 2002-2008, we document a positive association between excess control and audit fees while disentangling the effects of both ownership concentration and family ownership. We also document that excess control primarily impacts on audit fees over and above the effects of ownership concentration and/or family ownership. Furthermore, we find that the different sources of excess control, dual-class shares and pyramids, have different impact on audit fees.
Keywords: excess control; ownership concentration; dominant shareholders; agency costs; expropriation; family ownership; audit fees; Canada; dual-class shares; pyramids.
Int. J. of Accounting and Finance, 2013 Vol.4, No.2, pp.119 - 142
Submission date: 03 Jul 2012
Date of acceptance: 09 Mar 2013
Available online: 07 Nov 2013