This paper examines the determinants of sustainability performance in the financial industry at the firm, country and legal origin levels. Through the analysis of the ESG score in a sample of 64 countries with 982 financial firms during the period between 2002 and 2018, we find that legal origin is a significant explanatory variable. In particular, our findings indicate that companies based in civil-law countries show higher values of ESG performance than their counterparts in common-law countries, suggesting the prevalence of the stakeholder theory in explaining the willingness of financial firms to engage in sustainability practices. Moreover, and following the assumptions of the “good governance” view, we also assess the joint the effect of corporate governance and legal origin ESG scores, finding that corporate governance structures emerge as a substitution mechanism of sustainability enhancement for financial firms based in common-law countries.

European Union adopted the Regulation (EU) No 537/2014, which in practice prohibits the joint provision of audit and most types of non-audit services (NAS). Regulators presume that NAS fees weaken auditor independence and, as a result, impair audit quality. As the evidence at the European level does not support this view, the question of whether the new regulation will enhance auditor independence remains open. We examine the association between future NAS fees and audit quality by distinguishing among tax, audit-related and other services. We base the analysis on a sample of Spanish listed companies for the period between 2005 and 2016, finding a consistent negative association between future other NAS fees and audit quality. This suggests that the expectation of future purchases of this type of NAS may impair auditor independence. Conversely, for tax and audit-related services results are not significant. Taken together, results suggest that European regulators should seek for further evidence before banning NAS, as some of them may in fact enhance audit quality.

We investigate the relationship between auditor-provided tax services (APTS) and tax avoidance in Spain. As a result of a recently enacted EU legislation, APTS is seriously restricted within the EU. The evidence available so far for the US provides consistent support for a positive relationship between APTS and tax avoidance. However, given the importance of country-specific institutional issues, such as litigation risk, to understand the relationship between auditors and clients, the possibility of generalising the US evidence to other countries is limited. Supporting this view, our results indicate that the positive relationship between APTS and tax avoidance observed in the US does not hold in the Spanish market. This result seems robust, as it holds independently of the proxy utilised for measuring tax avoidance, as well as across an array of sensitivity checks. This study has potentially interesting implications at both theoretical and practical levels.

Purpose: This paper aims to examine the effects of the 2014 European regulatory reform on auditors’ activity, the audit outcome and the audit market, with a focus on the Spanish market. Design/methodology/approach: The research is based on in-depth, semistructured interviews with partners of the main audit firms operating in the Spanish market. This qualitative approach provides a precise identification of the cause-effect relationships of the new measures introduced by the European audit regulation. Findings: The findings indicate that, based on auditors’ opinions, the costs of the main regulatory changes outweigh the benefits. The European Union (EU) Audit Regulation imposes more demanding provisions, such as an extended auditor’s report, mandatory audit firm rotation, more banned nonaudit services and stricter quality controls, resulting in substantial side effects on audit activity and the audit market. This could undermine the objective of enhancing the quality of audit services. Originality/value: To the best of the authors’ knowledge, this is the first study to analyze the effect of the 2014 EU regulatory reform on audit activity, audit market and audit outcome based on auditors’ perceptions. The findings may be of interest to academics, professionals and regulators alike, as they offer valuable insights for assessing the effectiveness of the new audit provisions. Additionally, the qualitative methodology used facilitates a causal analysis of the key elements introduced by the regulations, potentially paving the way for future research avenues.