Pornsit Jiraporn|Pandej Chintrakarn|Shenghui Tong|Sirimon Treepongkaruna
Does board independence substitute for external audit quality? Evidence from an exogenous regulatory shock
Pennsylvania State University|Mahidol University|China Huarong Energy (China)|University of Western Australia
exploiting passage sarbanesoxley act sox exogenous regulatory shock investigate whether board independence substitutes external audit quality based 14000 observations across 18 years differenceindifference estimates show firms forced raise board independence far less likely employ big 4 auditor particular board independence lowers propensity use big 4 auditor approximately 38 firms stronger board independence enjoy effective governance therefore need much external audit quality less effective governance based natural experiment empirical strategy far less vulnerable endogeneity thus considerably likely show causal effect rather merely association