The impact of audit committee’s chairman characteristics on auditor choice in Malaysia ace market

Audit quality is a strong external monitoring mechanism to protect the interest of the owners according to agency theory. Many factors related to corporate governance influence the auditor choice, whereas one of the most influencing factors is audit committee that oversees the process of financial reporting. The audit committee is headed by the chairman that has a strong influence on the audit committee structure and auditor choice, therefore, characteristics of the chairman are very important for the auditor choice. The auditor choice research has paid more attention to the audit committee overall but has overlooked the unique agency context of audit committee’s chairman characteristics on the audit quality especially on auditor choice. Therefore, the purpose of this study is to investigate the audit committee’s chairman characteristics on the auditor choice. The sample of 111 firms listed on the ACE market was used to test the hypotheses over the period 2018. Using logistic regression, this study finds that only the audit committee’s chairman tenure and busyness are significant factors that influence the auditor choice. Whereas, the audit committee’s chairman ethnicity, expertise and qualification have no significant influence on the auditor choice. These results have theoretical implications for the alignment and entrenchment hypotheses of the agency theory and practical implications for the regulators to improve the audit committee’s structure and regulations.