Financial Characteristics of Companies Audited by Large Audit Firms

Author First name, Last name, Institution

Marinos Mastorakis
Costas Siriopoulos
Stavros Arvanitis

Document Type


Source of Publication

SSRN Electronic Journal

Publication Date



Purpose "“ The purpose of this paper is to examine how financial characteristics associated with the choice of a big audit firm with further investigation on the agency costs of free cash flows.Design/methodology/approach "“ The sample used for this work includes industrial listed companies from Germany and France. To test our hypothesis, we used a number of logit models, extending the standard model selection audit firm, to include the variables of interest. Following previous work, our dependent dummy variable is Big4 or non-Big4.Findings "“ We observed that most independent variables in the German companies show similar results to previous work, but we did not have the same results for the French industry. Moreover, our findings suggest that the total debt and dividends can be an important reason for determining the choice of a large audit firm, reducing agency costs of free cash flows.Research limitations/implications "“ This study has some limitations on the measurements of the cost of the audit fees and also generates opportunities for additional searching.Originality/value "“ The paper provides only one aspect to explain the relationship between the problems of agency costs of free cash flow and influence in choosing a large auditing firm, which stems from investors' demand for higher quality audits.




Elsevier BV



Indexed in Scopus


Open Access