Please use this identifier to cite or link to this item: http://hdl.handle.net/11718/26048
Title: Voting on auditor ratification by shareholder type: impact of institutional shareholder dissent on NAS fees and audit quality
Authors: Purohit, Siddharth
Desai, Naman
Keywords: Auditor ratification;Shareholder;NAS fees;Dissent;Institutional investor;Audit
Issue Date: 10-Jan-2023
Publisher: SAGE Publications
Citation: Purohit, S., & Desai, N. (2023). Voting on Auditor Ratification by Shareholder Type: Impact of Institutional Shareholder Dissent on NAS Fees and Audit Quality. Journal of Accounting, Auditing and Finance. https://doi.org/10.1177/0148558X221142798/ASSET/IMAGES/LARGE/10.1177_0148558X221142798-FIG1.JPEG
Abstract: Institutional investors have a better understanding of corporate performance than non-institutional investors, and their presence tends to improve the overall governance mechanism of a company and discipline top management against taking self-serving or myopic decisions. In this study, we examine shareholder voting patterns on auditor reappointments in Indian companies and examine whether institutional shareholder dissent on auditor reappointment acts as a disciplining mechanism on subsequent auditor actions and leads to improvement in audit quality. Our results indicate that institutional shareholder dissent on auditor reappointment is positively related to relative magnitude of non-audit services (NAS) fees in the previous year. More importantly, we observe that auditors are sensitive to institutional dissent and respond by charging a lower amount of NAS fees and providing superior audit quality in the subsequent year to signal increased independence and objectivity. Similar results are not observed in the case of retail shareholders. Our findings reinforce the role of institutional shareholders as important monitors in the corporate governance process and call for regulation to mandate the participation of shareholders in the auditor appointment process.
URI: http://hdl.handle.net/11718/26048
ISSN: 2160-4061
Appears in Collections:Open Access Journal Articles



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