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Chief executive officer retirement and auditor’s risk assessment: The interacting effect of chief executive officer identity in family firms

Purpose – This study aims to examine the unique nature of family firms by investigating the moderating effect of chief executive officer (CEO) identity on CEO career horizon and the auditor’s client risk assessment. Consistent with literature on family businesses, the level of CEO attachment to soci...

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Main Authors: Abdulmalik, Salau Olarinoye, Amran, Noor Afza, Che Ahmad, Ayoib
Format: Article
Language:English
Published: Emerald Publishing Limited 2020
Subjects:
HF5601 Accounting
Online Access:http://repo.uum.edu.my/27225/1/JFRA%2018%202%202020%20343%20361.pdf
http://repo.uum.edu.my/27225/
http://doi.org/10.1108/JFRA-04-2019-0052
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spelling my.uum.repo.272252020-07-23T01:39:07Z http://repo.uum.edu.my/27225/ Chief executive officer retirement and auditor’s risk assessment: The interacting effect of chief executive officer identity in family firms Abdulmalik, Salau Olarinoye Amran, Noor Afza Che Ahmad, Ayoib HF5601 Accounting Purpose – This study aims to examine the unique nature of family firms by investigating the moderating effect of chief executive officer (CEO) identity on CEO career horizon and the auditor’s client risk assessment. Consistent with literature on family businesses, the level of CEO attachment to socio-emotional wealth (SEW) varies among family businesses.Design/methodology/approach – This study used a longitudinal sample of 2,063 non-financial family firm-year observations from 2005 to 2016 listed on the Bursa Malaysia. The study used the general method of moments (GMM), which controls for endogeneity concerns.Findings – The results reveal that, without the moderating effect of CEO identity, the relationship between CEO career horizon and auditor’s risk assessment is positive, which suggests that the auditor’s risk perception of retiring CEOs is very high. However, the interaction of CEO identity reverses the relationship as evidenced by the negative and significant coefficient on the interacted terms. The finding suggests that the auditor’s perceived risk associated with CEO career horizon is lower in family firms with CEOs affiliated to family members or in which the CEO has an equity stake. Overall, the findings provide compelling evidence that the extent of the CEO’s attachment to the firm’s SEW affects the auditor’s client risk assessment.Practical implications – The findings of the study serve as an enlightenment to policymakers such as Bursa Malaysia and Security Commission that within the family-controlled firms, differences still exist;therefore, there might be a need for future regulatory initiative to cater for the specific need of familycontrolled firms.Originality/value – The study contributes to prior literature by departing from the agency theory adopted in previous studies on auditor choice in family firms under the assumption that family firms are homogenous. Emerald Publishing Limited 2020 Article PeerReviewed application/pdf en http://repo.uum.edu.my/27225/1/JFRA%2018%202%202020%20343%20361.pdf Abdulmalik, Salau Olarinoye and Amran, Noor Afza and Che Ahmad, Ayoib (2020) Chief executive officer retirement and auditor’s risk assessment: The interacting effect of chief executive officer identity in family firms. Journal of Financial Reporting and Accounting, 18 (2). pp. 343-361. ISSN 1985-2517 http://doi.org/10.1108/JFRA-04-2019-0052 doi:10.1108/JFRA-04-2019-0052
institution Universiti Utara Malaysia
building UUM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Utara Malaysia
content_source UUM Institutional Repository
url_provider http://repo.uum.edu.my/
language English
topic HF5601 Accounting
spellingShingle HF5601 Accounting
Abdulmalik, Salau Olarinoye
Amran, Noor Afza
Che Ahmad, Ayoib
Chief executive officer retirement and auditor’s risk assessment: The interacting effect of chief executive officer identity in family firms
description Purpose – This study aims to examine the unique nature of family firms by investigating the moderating effect of chief executive officer (CEO) identity on CEO career horizon and the auditor’s client risk assessment. Consistent with literature on family businesses, the level of CEO attachment to socio-emotional wealth (SEW) varies among family businesses.Design/methodology/approach – This study used a longitudinal sample of 2,063 non-financial family firm-year observations from 2005 to 2016 listed on the Bursa Malaysia. The study used the general method of moments (GMM), which controls for endogeneity concerns.Findings – The results reveal that, without the moderating effect of CEO identity, the relationship between CEO career horizon and auditor’s risk assessment is positive, which suggests that the auditor’s risk perception of retiring CEOs is very high. However, the interaction of CEO identity reverses the relationship as evidenced by the negative and significant coefficient on the interacted terms. The finding suggests that the auditor’s perceived risk associated with CEO career horizon is lower in family firms with CEOs affiliated to family members or in which the CEO has an equity stake. Overall, the findings provide compelling evidence that the extent of the CEO’s attachment to the firm’s SEW affects the auditor’s client risk assessment.Practical implications – The findings of the study serve as an enlightenment to policymakers such as Bursa Malaysia and Security Commission that within the family-controlled firms, differences still exist;therefore, there might be a need for future regulatory initiative to cater for the specific need of familycontrolled firms.Originality/value – The study contributes to prior literature by departing from the agency theory adopted in previous studies on auditor choice in family firms under the assumption that family firms are homogenous.
format Article
author Abdulmalik, Salau Olarinoye
Amran, Noor Afza
Che Ahmad, Ayoib
author_facet Abdulmalik, Salau Olarinoye
Amran, Noor Afza
Che Ahmad, Ayoib
author_sort Abdulmalik, Salau Olarinoye
title Chief executive officer retirement and auditor’s risk assessment: The interacting effect of chief executive officer identity in family firms
title_short Chief executive officer retirement and auditor’s risk assessment: The interacting effect of chief executive officer identity in family firms
title_full Chief executive officer retirement and auditor’s risk assessment: The interacting effect of chief executive officer identity in family firms
title_fullStr Chief executive officer retirement and auditor’s risk assessment: The interacting effect of chief executive officer identity in family firms
title_full_unstemmed Chief executive officer retirement and auditor’s risk assessment: The interacting effect of chief executive officer identity in family firms
title_sort chief executive officer retirement and auditor’s risk assessment: the interacting effect of chief executive officer identity in family firms
publisher Emerald Publishing Limited
publishDate 2020
url http://repo.uum.edu.my/27225/1/JFRA%2018%202%202020%20343%20361.pdf
http://repo.uum.edu.my/27225/
http://doi.org/10.1108/JFRA-04-2019-0052
_version_ 1674068756520763392
score 13.211869

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