부산대학교 도서관

This study examines the relationship between control–ownership disparity and audit quality. The analysis results are summarized as follows. First, consistent with the previous studies, a significantly negative relationship is observed between individual firms’ control-ownership disparity and audit fees. We also find a significant and negative relationship between control-ownership disparity and audit hours at the firm level. Secondly, we find, in our analysis at the business group level, that there exists a significantly negative relationship between a conglomerate’s control-ownership disparity and audit fees/hours. In the test of which variable has more impact on audit fees and audit hours between firm-level disparity and group-level disparity, the effect of control-ownership disparity on audit fees and audit hours is found to be more prominent at the group level than at the individual firm level. Our additional tests using discretionary accruals as an indicator of audit quality show that a business group’s control-ownership disparity and discretionary accruals have a significant and positive relationship. After controlling for potential self- selection bias in the auditor choice, our main test results are continuously supported. Previous studies have focused on analyses based on the control–ownership disparity of individual companies. This is the first study to include the control–ownership disparity of conglomerates in addition to analyzing the behavior of individual firms. The findings herein reveal that the decisions of the conglomerate are more important in determining the level of the audit quality than the decisions of individual companies within the conglomerate. Thus, regulating conglomerates may be more effective than attempting to control individual companies in terms of maintaining the reliability of accounting information. Future research may examine the decision-making mechanisms at work in conglomerates and their influence on control–ownership disparity.