Business Commons^™

Group-Affiliated Firms And Audit Fees: Evidence From India, Mohinder Parkash, Rajeev Singhal, Yun Ellen Zhu

International Review of Business and Economics

This study analyzes the role of auditors and affiliation to a business group in corporate governance of firms by examining the audit fees charged to group-affiliated and independent firms. Agency problems in firms may be mitigated by the monitoring provided by controlling investors of firms affiliated to business groups. On the other hand, concentrated ownership may also result in higher agency costs because of inefficient profit distributions, tunneling, and complicated ownership structures. Audit fees are determined by the effort expended and the risks faced by auditors. We examine the relationship between audit fees and Group-affiliation for Indian firms. We find …