Abstract
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•We examine the link between corporate governance and auditor choice in MENA.•The demand of high audit quality differs according to ownership identity.•The change in the board composition following privatization affects auditor choice.•Internal and external governance mechanisms act as substitutes.•Internal governance is more effective in countries with weak investor protection.
This paper examines whether post- privatization internal governance mechanisms act in a complementary or substitutable fashion in determining auditor choice of newly privatized firms in the Middle East and North Africa region. We find that foreign ownership and board size are positively related to appointing a BigN auditor, while government ownership, board independence and CEO duality show a negative correlation. Moreover, we find that the effectiveness of the board of directors acts as a substitute to the effectiveness of ownership structure in choosing a BigN auditor. Our results suggest that better governance provide a better financial reporting quality of privatized firms.