Board co-option and audit quality: Evidence from US

This study investigates the impact of board co-option on audit quality, a vital dimension of corporate governance that has received limited attention. Using a dataset of 9605 firm-year observations from U.S. listed firms, we examine the extent to which co-opted directors aligned with CEOs compromise audit quality, measured through BIG4 auditor selection and audit fees. Results show that board co-option significantly reduces audit quality, a finding robust to alternative co-option measures, propensity score matching, and IV-Probit models. Notably, the presence of a CSR committee and stronger governance scores mitigate these negative effects—highlighting their significant role. These findings accentuate the need for regulatory reforms to strengthen board independence and institutionalize CSR committees, enhancing governance practices and accountability.