Family control, board independence and earnings management : evidence based on Hong Kong firms

In this study, we document that independent corporate boards of Hong Kong firms provide effective monitoring of earnings management, which suggests that despite differences in institutional environments, corporate board independence is important to ensure high-quality financial reporting. The findings also show that the monitoring effectiveness of corporate boards is moderated in family-controlled firms, either through ownership concentration or the presence of family members on corporate boards. The results based on firms reporting small earnings increases provide additional support for our finding that the monitoring effectiveness of independent corporate boards is moderated in family-controlled firms

Joint Effect of Investor Protection and Securities Regulations on Audit Fees

We document in this study that the institutional factor of securities regulations is positively associated with audit fees in low investor-protection countries. Strict securities regulations in these countries are likely to be associated with higher audit effort and risk, which result in higher audit fees. On the other hand, we do not find any significant association between audit fees and securities regulations in high investor-protection countries. Auditors in these countries generally expend higher audit effort to reduce risk irrespective of the strictness of securities regulations. Consequently, strict securities regulations do not have a significant impact on audit fees in these countries. Our findings suggest that strict securities regulations in weak investor-protection countries play an important role in audit pricing.Audit fees Investor protection Securities regulations