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The purpose of this paper is to test the relative strengths of efficiency and opportunistic considerations in making client auditor choice decisions in an emerging audit services market. The authors examine whether the degrees of foreign and institutional shareholdings, audit complexity, industry orientation (i.e. whether the firm belongs to the banking sector), ownership concentration in the hands of domestic sponsor shareholders, state ownership, power concentration in the hands of a CEO who is also the chairperson of the board, and audit risk affect the demand for superior monitoring by Big‐4 auditors.

The authors carry out a multivariate analysis using binary logit regression technique. They test whether efficiency or opportunism rules auditor choice of firms in their sample. Efficiency‐based variables used in the authors' models include foreign shareholding by a multinational parent, institutional shareholding, audit complexity and whether the firm belongs to the banking sector. Opportunism‐based variables include ownership concentration in the hands of domestic sponsor shareholders other than government, government shareholding, power concentration in the hands of a CEO who holds the position of chair as well, and audit risk.

The authors find that opportunistic considerations outweigh efficiency considerations in shaping auditor choice decisions in their sample. Two out of four efficiency arguments (foreign shareholdings in the hands of a multinational parent and institutional shareholding) support efficiency as the main driver of auditor choice while one (client belonging to the banking sector) indicates otherwise. On the other hand, three out of four opportunism arguments (government shareholding, CEO‐chair duality and audit risk) document opportunistic considerations to be the main forces behind auditor choice. The influence of foreign shareholding becomes apparent only when the foreign shareholder is the controlling shareholder.

This paper is the first of its kind to address auditor choice in an emerging market context. No other paper looked at auditor choice using efficiency‐opportunism incentives. The paper contributes to our understanding of auditor choice dynamics in emerging markets. The finding that institutional shareholding is associated with choice of high quality auditors is encouraging. Individual small investors can use institutional investors as a shield to protect their investment through the higher quality auditing linked to the presence of institutional investors.

The purpose of this paper is to provide a comprehensive analysis of the audit services market in Bangladesh. It explores the trend in audit fees over a period of 14 years and shows that in real terms audit fees have actually been declining although in nominal terms it appears otherwise. The study aims to expand the domain of audit fee literature by determining audit concentration in the market and thereby showing how the market is not dominated by the so‐called Big Four firms. The paper also examines the degree of inside ownership as a possible determinant of audit fees.

The paper employs a multivariate analysis of estimating audit fees against mainly client‐specific attributes. It computes Helfindahl Index to measure audit concentration in the market.

Results from the multivariate analysis show that the degree of inside ownership inversely affects audit fees. Client size and their multinational affiliation have a significant positive effect on audit fees. Firms in the financial sector also tend to pay significantly higher audit fees in Bangladesh. The reported inverse relationship between the audit fee and proportion of inside‐ownership in the auditee firm indicates, per agency theory prediction, that firms with more diverse ownership in Bangladesh pay more in audit fees. However, contrary to the findings in prior empirical studies, audit fee was reported to be significantly negatively related to audit complexity. As the audit complexity measure is revised, the variable ceases to be a significant driver of audit fees. This could be attributable to a methodological flaw in the traditional method of measuring audit fees as the ratio of inventory and receivables to total assets or to increased efficiency achieved by auditors via scale economies while auditing companies owned essentially by the same group of people.

The main limitation of the paper is that the closing period of the data is 2003, although there is no evidence to believe that the general determinants of audit fees have changed in Bangladesh since 2003.

A decline in real audit fees is a matter of concern for the quality of audit services because it may impede audit firms to invest in talent and other forms of audit technology essential to delivering a high quality audit. It may also have wider implications on the quality of financial reporting in the country.

If the audit fees do not increase keeping pace with general power, the profession would struggle to recruit talented individuals to the auditing profession. This may have longer‐term social implications as it may drive away potential graduates with little or no parental resources to support them to develop an accounting career with substantial dependence on family funds.

The current study is the first to introduce ownership structure based perspective, in a multivariate format, to explain what drives audit fees in a developing country setting. It also is the first to compute audit concentration in a developing country context. This is the first paper to present audit fee trend in real terms, i.e. inflation adjusted, client size adjusted, and so on.

The purpose of this paper is to test whether dominant shareholder(s) of a firm enhance performance in Bangladesh and thus examines the arbitrary moves by the regulatory bodies, in the name of promoting “good corporate governance”, to restrict ownership concentration.

Building on the established literature, a simultaneous equations approach is applied to model the relationship between ownership concentration and performance and is tested on a sample of 567 observations on firms listed on the Dhaka Stock Exchange over a seven‐year period. The two equations model consists of firm performance and ownership concentration as endogenous variables along with other governance variable.

The results suggest a significant positive co‐deterministic relationship between ownership concentration and firm performance indicating that ownership concentration and firm performance simultaneously impact each other. It suggests that the ownership restriction imposed by the Securities and Exchange Commission is unjustified and detrimental to firm performance/growth in emerging countries such as Bangladesh.

This new evidence from an emerging market enhances our understanding of corporate governance in Asian countries. The study has implications for stakeholders, regulators and policy makers to revisit their attempt to limit founder‐family ownership holdings. Instead, their aim should be to balance the home‐grown unique features, such as a Top‐1 dominant shareholder, with Western governance mechanisms.

The paper is the first to consider Top 1 shareholder's ownership as the measure of ownership concentration, which is an important feature of the corporate sector in emerging markets. In emerging markets, founder‐family ownership concentration acts as an alternative governance mechanism substituting for strong and effective legal backing and other market‐driven monitoring mechanisms.