Informal Hierarchy Of Independent Directors And Auditor Selection

The corporate governance effect at the board informal hierarchy has been confirmed by domestic and foreign literature.Therefore,it is speculated that independent directors are consistent in their division of labor and representative groups in the board of directors,and there is no clear formal system constraint among each other,the informal hierarchy formed by the heterogeneity of members' social capital can also affect the governance effect of independent directors.There have been studies analyzing the influence of independent directors on auditor selection from the perspective of personal characteristics such as overseas background and network centrality.However,as a collective decision-making team,the interaction between independent director members will affect the performance of their duties and select audits.This paper introduces the concept of informal hierarchy,infers that informal hierarchy can promote the coordinated action of independent directors,motivate members to do outstanding work,and improve the effectiveness of independent director supervision by establishing a theoretical model.At the same time,as the selection of auditors is one of the important decision-making matters for independent directors to perform their supervisory duties,the informal hierarchy of independent directors can play a role of coordination and incentives,improve the efficiency and effectiveness of independent director auditor selection decisions,and promote the selection of high-quality auditors by companies.This article selects A-share non-financial listed companies from 2008 to 2017 as a research sample.First,the individual social capital of independent directors is measured from three dimensions: horizontal,vertical,and personal honor.Then,the Gini coefficient is used to measure the social capital,Informal hierarchies resulting from differences in respect for each other due to differences in individual abilities.From the perspective of auditor selection and decision-making,this paper studies the impact of the informal hierarchy of independent directors on the selection of high-quality auditors,and examines the differences in the effects of the informal hierarchy under different property rights and performance pressures.The empirical conclusions of this paper are as follows:(1)The informal hierarchy of independent directors can promote the selection of high-quality auditors;(2)Group inspection discovery based on the nature of property rights,and compared with state-owned enterprises,in the sample of non-state-owned enterprises,the informal hierarchy of independent directors has a more significant impact on auditor selection decisions.(3)Compared with companies with low performance pressures,when companies face greater performance pressures,the informal hierarchy has a stronger positive impact on auditor selection.The above conclusions are still sound after using the instrumental variable method and the propensity score matching method to control endogenous problem,replace the main variables,increase the control variables,and remove the cross-listing samples.The conclusions of the study have enriched the influence of the informal hierarchy on the behavior of independent directors to a certain extent,and deepened the research on the influencing factors of auditor selection.At the same time,it provides empirical evidence for companies to improve the structure of independent directors,promote the selection of high-quality auditors,and improve corporate governance.