– The purpose of this study is to investigate whether hiring a high-quality auditor (i.e. industry specialist) depends on corporate governance indicators after controlling a different level of agency conflicts (ACs).
– This paper uses logistic regressions on 12,449 firm-year samples of Taiwanese public companies from 1998 to 2011 by grouping the samples into three categories (i.e. low, medium and high AC).
– The results show that the corporate governance indicators can explain the decision of auditor selection only in low and medium AC groups, which suggest that there may be a complementary relationship between external (i.e. auditors) and internal governance when the ACs are mild.
– The paper contributes to the ongoing debate between the complementary and substitutable effects. When the internal ACs are controlled, the internal governance and auditor selection are complemented.
