Ownership Structure and Audit Firm Selection in Listed Non-Financial Firms in Nigeria

Abstract

This study examines the influence of ownership structure on audit firm selection in listed non-financial firms in Nigeria. Using secondary data from 67 non-financial firms over a 10-year period (2015–2024), the study employed a stratified random sampling technique and panel data regression analysis to investigate the relationship between institutional ownership, block family ownership, government ownership, audit committee independence, and firm size on the likelihood of selecting high-quality audit firms (Big 4 auditors). The findings revealed that institutional ownership has a positive and significant effect on audit firm selection, suggesting that firms with strong institutional investors are more likely to engage reputable auditors due to higher corporate governance standards. Block family ownership negatively influences audit firm selection, implying that family-controlled firms may prefer lower-tier auditors to maintain greater financial control and reduce audit costs, while Government ownership exhibits a weak negative effect, likely due to political influences and internal audit mechanisms. Audit committee independence does not significantly impact audit firm selection, indicating that independent audit committees alone may not be sufficient to influence audit choices in the presence of dominant ownership structures. Firm size, however, has a strong positive effect, with larger firms more likely to engage top-tier auditors due to increased transparency requirements. This study recommends that firms should be encouraged to engage Big 4 audit firms or enhance audit quality standards for non-Big 4 firms so as to ensure financial transparency and investor confidence.