Family Ownership, Auditor Choice and Audit Fees: Evidence from Hong Kong

Adrian C.H. Lei, Samuel W. K. Lam


Purpose –The primary purpose of this paper is to examine the impact of family control/ownership on auditor choice and audit fees in Hong Kong. Besides, this paper also addresses the impact of multiple directorship of audit committee members on these two external auditing dimensions.

Design/methodology/approach –Panel data technique is used to perform analysis. The unbalanced panel data set consists of 2,724 firm-year observations for nine years from year 2001 to 2009.

Findings –The results indicate that family firms have a higher likelihood to appoint Big 5 auditors, it supports the signaling hypothesis. Contrasting the perceived higher audit risk, they incur lower audit fees. The results also show the independent audit committee members with multiple directorships are not affected by their busyness. Our results are also robust to the alternative definition of family firms and by using the sub-sample within 2004 - 2009. We also find that the firms controlled by recognized Big family in Hong Kong society incur higher audit fees but no support for family firm incurring higher non audit fee.

Originality/value–First, our paper responds to the recent call for research for auditor choice and audit fees within the context of emerging economies. Secondly, this paper also explores other determinants of auditor choice and audit fees in HK such as the characteristics of the audit committee and multiple directorships. Thirdly, our findings contribute to the family firms’ literature by shedding light on family firms do enhance their external auditing function to improve the credibility of financial reporting of the firms which is expected to help investors and public in HK to know more about the effect of family control on the external auditing to protect their interest. The findings in this paper are also valuable to regulators who might concern the corporate governance and informativeness in family firms.


Full Text:




  • There are currently no refbacks.

Copyright (c) 2018 Adrian C.H. Lei, Samuel W. K. Lam

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.

International Journal of Accounting and Financial Reporting  ISSN 2162-3082

Copyright © Macrothink Institute 

'Macrothink Institute' is a trademark of Macrothink Institute, Inc.

To make sure that you can receive messages from us, please add the '' domain to your e-mail 'safe list'. If you do not receive e-mail in your 'inbox', check your 'bulk mail' or 'junk mail' folders.