Government and managerial influence on auditor switching under partial privatization Mohammad A. Bagherpour a , Gary S. Monroe b , Greg Shailer c,d,⇑ a School of Administrative and Economic Science, Ferdowsi University of Mashhad, Mashhad, Iran b School of Accounting, and Centre for Accounting & Assurance Research, The University of New South Wales, Sydney, NSW 2052, Australia c Research School of Accounting and Business Information Systems, The Australian National University, Hanna Neumann Building 21, Canberra, ACT 0200, Australia d Australian National Centre for Audit & Assurance Research, The Australian National University, Hanna Neumann Building 21, Canberra, ACT 0200, Australia abstract We investigate how auditor switching is affected by government influence, misalignment between type of auditor (government vs. private) and type of controlling shareholder (government vs. pri- vate), and misalignment between an incumbent auditor and imputed preferences of managers in a market characterized by continued substantial government ownership in listed entities. We exploit a natural policy and regulatory experiment in Iran that allows us to investigate what happens when previously govern- ment-owned entities are partially privatized as listed entities where, in many cases, the government retains significant owner- ship interests. At the same time, there were significant changes in the audit market, resulting in large increases in the number of private sector auditors competing for previously state-adminis- tered audits. We find the likelihood of auditor switches is strongly associated with measures of misalignment between type of auditor and type of controlling shareholder and auditor–managerial mis- alignment, but these associations are constrained by significant government influence. Exposing the constraining effect of signifi- cant government influence on auditor switching is an important contribution to our understanding of privatizations, government shareholder influence and auditor choice. These results have impli- cations for policy development in other emerging and transition http://dx.doi.org/10.1016/j.jaccpubpol.2014.04.004 0278-4254/Ó 2014 Published by Elsevier Inc. ⇑ Corresponding author at: Research School of Accounting and Business Information Systems, The Australian National University, Hanna Neumann Building 21, Canberra, ACT 0200, Australia. Tel.: +61 2 6125 4333. E-mail address: greg.shailer@anu.edu.au (G. Shailer). J. Account. Public Policy xxx (2014) xxx–xxx Contents lists available at ScienceDirect J. Account. Public Policy journal homepage: www.elsevier.com/locate/jaccpubpol Please cite this article in press as: Bagherpour, M.A., et al. Government and managerial influence on auditor switching under partial privatization. J. Account. Public Policy (2014), http://dx.doi.org/10.1016/ j.jaccpubpol.2014.04.004