The Effect of Ultimate Controller’s Characteristics on Audit Fees
|School||Dongbei University of Finance|
|Keywords||Pyramid Ownership Structure Ultimate Controller’sCharacteristics Audit Pricing|
Pyramid ownership structure was first proposed by La Porta in1999, which means that stakes of a company are not widely held by the public, but concentrated in the hands of the ultimate controller through the controlling chain, and is more common in emerging markets. the effects of Pyramid are as follows:first, more stakes are hold by an ultimate controller instead of the public; second, the separation of ownership and controllership. The former one leads to the agency problem between controlling shareholders and small shareholders, the latter separation of ownership and controllership, according to the previous research, negatively affects the corporate performance. corporate value and improve the financial leverage, increasing business risk. The domestic research on ultimate controller only starts from recent years. In the domestic market, ownership concentration phenomenon is particularly prevalent, combined with China’s national conditions, existing research expand La Porta’s Pyramid ownership concept. In view those Chinese enterprises have a higher proportion of state-owned shares and domestic special audit market such as the diversification of auditor selection, this paper assumes that there existspecific correlation between corporate ownership structure and audit pricing.That is the target of this study is to discusses the relationship between percentage of the ultimate controller’s ownership, the degree of separation of ultimate ownership and ultimate control rights, the nature of ultimatecontroller and audit pricing based on related literature reviewThis paper selectseffective data of A-share listed companies in the period of the year2008-2011to verify the assumptions in this paper and analysis the influence factors of audit pricing, the main concern is characteristics of ultimate controller. The empirical results show that the percentage of the ultimate controller’s ownership is significantly related with audit pricing. In addition, this paper finds that the degree of separation of ultimate ownership and ultimate control rights is positively correlated with audit pricing in the low level while negatively in the high level. The third concern of this paper is about the ultimate controller’s attribute, the results indicate that listed corporations eventually controlled by government or not pay different fees to auditors. Specifically corporations ultimately controlled by local governments pay the least, followed by the central governments, non-states.This paper includes the following six parts:The first chapter is the introduction, a brief introduction of research background, theoretical and practical significance of this topic, and a summary of the research frame and content.The second chapter is the literature review, from perspectives of the ultimate controller’s characteristics, audit pricing, as well as the ultimate controller and audit pricing respectively.The third chapter is basic theory, in this part the paper firstly definite conceptions of the pyramid ownership structure, ultimate controller, ultimate ownership and ultimate control right and relationship among them, and some intuitive examples. Then this chapter also introduces the agent theory, entrenchment effect, synergetic effect and audit pricing theory.The fourth chapter is the research design, based on the related theories, this part proposes hypothesis about the relationship of the ultimate controller’s characteristics and audit pricing. Then according to the hypothesis, it selects appropriate variables and builds corresponding audit pricing model.The fifth chapter, uses A-share listed companies in the period of the year2008-2011as the sample and the multiple regression test to verify the above theoretical analysis and assumptions after descriptive statistics and correlation analysis.The sixth chapter is the conclusions and political recommendations, drawing a conclusion based on the theoretical analysis and empirical tests and putting forward reasonable suggestions. The end of this article points out the research innovation and limitations.