TY - JOUR
T1 - Corporate corruption and future audit fees: Evidence from a quasi-natural experiment
AU - Hu, Juncheng
AU - Li, Xiaorong
AU - Wan, Zhong
N1 - Funding Information:
We thank Keith Duncan, Robert Faff, Jan Hollindale, and Xi Wu for their helpful remarks. We are grateful to Jessica Xu and Shuya Wang for data collection. Xiaorong Li acknowledges the financial support from the National Natural Science Foundation of China (Project No.71972192, 72272166), the Fok Ying Tung Education Foundation (Project No.161077), and the Zhongcai-Anrong Local Finance Investment and Funding Research Institute. All remaining errors are our own.
Publisher Copyright:
© 2023 Elsevier Ltd
PY - 2023/6/3
Y1 - 2023/6/3
N2 - Using a difference-in-differences estimation that relies on China's anti-corruption campaign as a regulatory shock, we report that an exogenous reduction in firm-level corruption leads to lower future audit fees. Further triple difference analyses reveal that the decrease in future audit fees is more significant for firms operating in regions with weak legal environments, strong government control, and weak property rights protection. Government subsidies and related party transactions are channels through which the anti-corruption campaign affects future audit fees. Compared to previous literature, we conclude the effect of corruption on future audit fees is causal.
AB - Using a difference-in-differences estimation that relies on China's anti-corruption campaign as a regulatory shock, we report that an exogenous reduction in firm-level corruption leads to lower future audit fees. Further triple difference analyses reveal that the decrease in future audit fees is more significant for firms operating in regions with weak legal environments, strong government control, and weak property rights protection. Government subsidies and related party transactions are channels through which the anti-corruption campaign affects future audit fees. Compared to previous literature, we conclude the effect of corruption on future audit fees is causal.
UR - http://www.scopus.com/inward/record.url?scp=85162166588&partnerID=8YFLogxK
U2 - 10.1016/j.jcae.2023.100367
DO - 10.1016/j.jcae.2023.100367
M3 - Article
AN - SCOPUS:85162166588
SN - 1815-5669
JO - Journal of Contemporary Accounting and Economics
JF - Journal of Contemporary Accounting and Economics
M1 - 100367
ER -
