Auditor industry specialization, board governance and investment efficiency

The purpose of this study is to examine the interaction effect of auditor industry specialization and board governance on investment efficiency. This study investigates whether board governance is more or less effective in constraining over and under investment for firms audited by industry specialists than for firms audited by non-specialists. This study applied a co-relational research design. A sample was selected of 100 Iranian manufacturing firms listed Tehran Stock Exchange (TSE) for a period of 2005-2011.Regression analysis was used to test the research proposition. The paper finds that over and under investment is more negatively associated with board governance for firms audited by industry specialists than for firms audited by non-specialists, consistent with the notion that there is a complementary relationship between auditor industry specialization and board governance. The findings suggest a positive interaction effect of auditor industry specialization and board governance on investment efficiency. This study contributes to the literature by documenting explicit evidence that high quality boards can be more effective through hiring industry specialist auditors. This study also suggests that it may be worth investigating the interaction effect among different corporate governance mechanisms and auditor industry specialization on investment efficiency.

کلیدواژه ها:

Auditor industry specialization ، board governance ، over investment ، under investment