Mimetic Isomorphism and Its Effect on the Audit Services Market

Han, Shin‐Kap

doi:10.1093/sf/73.2.637

Cited by 106 publications

(37 citation statements)

References 39 publications

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“…Secondly, policy makers have stressed that it is important for the functioning of the audit market that auditor differentiation is possible, and that mechanisms for differentiation other than auditor size and industry specialism exist. In particular, it is important that informed auditor choice is made on the basis of alternative sources rather than just choosing the most visible auditors in the market, such as the Big Four, because this is one of the mechanisms that drives audit market concentration (Han, 1994). Regulators have expressed concern regarding the lack of auditor differentiation, and as a result, they have encouraged the involvement of non-executive directors.…”

Section: Resultsmentioning

confidence: 99%

The Impact of Board Interlocks on Auditor Choice and Audit Fees

Johansen¹,

Pettersson²

2013

Corporate Governance

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Manuscript Type Empirical Research Question/Issue This paper uses unique Danish data to examine whether non‐executive directors draw on both direct and indirect ties in the network of interlocking directorates to impact auditor choice, and whether this impact has consequences for audit fees. Research Findings/Insight The paper finds clear evidence that non‐executive directors draw on their networks to impact auditor choice, and evidence that clients pay an audit fee premium when non‐executive directors are connected to audit firms outside the focal company. The relationship between non‐executive directors and auditors is well established in Denmark and exhibits features that currently emerge in international debates and regulations. Therefore, the national context offers an interesting setting for empirical evidence of whether international aspirations are likely to be realized. Theoretical/Academic Implications Audit‐related corporate governance research has predominantly adopted the agency theory paradigm and has only drawn on alternative theoretical perspectives to a limited extent. We draw on the literature about board interlocks and social network theory in order to develop a study that aims to increase our understanding of the non‐executive director–auditor relationship and the role that board networks have in governing auditor choice decisions. The study identifies interlocks as an infrastructure for differentiation in the audit market and determines that such differentiation is associated with an audit fee premium for audit firms. The findings indicate that personal experiences with auditors are shared among non‐executive directors and that audit attributes other than low cost audit, auditor size, and industry specialism, are important in the audit market. Practitioner/Policy Implications Our findings support continued efforts to strengthen the relationship between non‐executive directors and auditors. Our findings also indicate that board interlocks may constitute a mechanism that mitigates the audit market failure that arises because of a lack of auditor differentiation.

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Section: Resultsmentioning

confidence: 99%

The Impact of Board Interlocks on Auditor Choice and Audit Fees

Johansen¹,

Pettersson²

2013

Corporate Governance

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“…Such third party certifying organizations are joined by many thousands of internal firm credit departments that make their own evaluations, sometimes using third party information as inputs. Third, even more broadly, evaluations of creditworthiness rely heavily on the provision of standardized financial measures, which are created and sometimes audited by professional accountants following standardized rules and procedures governed by powerful institutions (Han, 1994).…”

Section: Creditworthiness and Liability Of Newnessmentioning

confidence: 99%

The age-effect of financial indicators as buffers against the liability of newness

Wiklund

Baker

Shepherd

2010

Journal of Business Venturing

224

169

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“…Differential levels of network involvement among firms introduce and reinforce systemic reputational differences among them that extend beyond their immediate circle of direct and indirect ties, affecting their visibility and attractiveness (Podolny 1993, Han 1994, Podolny and Stuart 1995. Arguing that prominence signals attractiveness, previous research argues that firms attach preferentially to other prominent firms, so that new alliances are more common between firms that occupy central positions in the overall network (Powell et al 1996, Gulati andGargiulo 1999).…”

Section: Network Endogeneitymentioning

confidence: 99%

Investigating the Microstructure of Network Evolution: Alliance Formation in the Mobile Communications Industry

Rosenkopf

Padula

2008

Organization Science

211

220

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T heories of network evolution frequently focus on "network endogeneity," which stresses predictable, path-dependent evolution rooted in previous network structure. However, theories of technological evolution and innovation remind us that networks may undergo significant change as technological discontinuities exert pressures on existing relationships and firms engage in exploratory search. How can we incorporate sources of change into our theories of network evolution instead of focusing so squarely on sources of inertia? By using recent advances in graph theory, we develop a more flexible theory of network evolution by examining two patterns of partner selection that have the potential to change networks: "shortcut" formation between relatively unconnected partner clusters, and the entry of new firms into the "main component" of incumbent partners. Our findings suggest an important contingency for the endogeneity perspective: structural homophily predicts shortcut formation but not alliance formation within clusters. Furthermore, we demonstrate that the pattern of alliance formation between incumbents and new entrants to the alliance network is driven by a combination of endogenous and exogenous mechanisms. New entrants attach to more prominent incumbents, but they are more likely to attach with an alliance deal that comprises multiple partners. We demonstrate these findings in an industry where systemic technology encourages cooperation and where network entry is prevalent-the mobile communications industry from 1993-2002.

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Mimetic Isomorphism and Its Effect on the Audit Services Market

Cited by 106 publications

References 39 publications

The Impact of Board Interlocks on Auditor Choice and Audit Fees

The Impact of Board Interlocks on Auditor Choice and Audit Fees

The age-effect of financial indicators as buffers against the liability of newness

Investigating the Microstructure of Network Evolution: Alliance Formation in the Mobile Communications Industry

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