Research On Family Members' Non-executive Directors' Kinship And Audit Needs

With the development of the Reform and Opening-up,private economy has became a very important part of our country's economy.There is a special kind of private companies among these which called family firms.Family firms in our country have great vitality and activity.According to the research,there are over 900 family firms that are listed in Shanghai and Shenzhen stock exchange by the end of 2016.The number of family firms is beyond the number of state-owned companies.That is why family firms turn into a fresh impetus of China.However there are many special agency conflicts inside family firms including: employing relatives or professional managers;family members' mutual benefit or losing trust of each other;concerning with the long-term interests or misappropriation of interests of the firm by family members.But do these special conflicts turn up with audit demand in order to alleviate the problems? That is the very point we are concerning with.We are going to do a research of the audit demand of non-executive directors in family firms.Auditing is an effective means to alleviate agency conflict and supervise inner governance.The non-executive directors are analogized as supervision director.Do they have the need of high-quality audit? This paper researched the listed family firms and divided the non-executive directors into family non-executive directors and non-family non-executive directors.We discussed if family non-executive directors and non-family non-executive directors have different need of audit.The results of this paper contribute to the development of our audit market and cooperate governance.This paper made a summary of literature of our country and foreign researchers.On based of this we come up with the hypothesis and our view of family firms' audit characteristics.The paper uses 2011-2015 listed family firms of Shanghai and Shenzhen.By the method of empirical research we discuss the need of audit by the choise of auditor,the quality of audit and audit fee.We found that in comparison non-family non-executive directors need large audit firms,the quality of audit raised and the audit fee decreased.family non-executive directors have no need of large audit firms,the quality of audit decreased and the audit fee raised.This phenomenon even clear when family member is the CEO.According to the result of this paper we come up with the policy proposal.