The influence of foreign institutional investors on audit fees: evidence from Chinese listed firms
The influence of foreign institutional investors on audit fees: evidence from Chinese listed firms
This study examines the influence of qualified foreign institutional investors (QFIIs) on investee companies’ audit fees. Using data from China, we find that ownership by QFII-licensed investors is positively associated with audit fees. Besides, audit fees are higher in companies with QFIIs than in those without, and the demand for more extensive audits increases with the number of QFIIs. Notably, the demand for more extensive auditing procedures is mainly attributable to QFIIs from jurisdictions with strong governance institutions or is driven by QFIIs from jurisdictions that are geographically distant from China. Our cross-sectional analysis reveals that this positive influence is more prominent when investee companies exhibit lower earnings quality or a weak sense of corporate social responsibility. Finally, our mediation analysis suggests that QFIIs can enhance firm value and that a portion of this effect is due to the increased audit effort driven by QFIIs.
Qualified foreign institutional investors, audit fees, firm value, geographical distance, institutional quality, shareholder protection
Li, Zhe
a9c524ce-3030-40bb-9bf5-6ca1ebf33d89
Wang, Bo
dc1fccae-55e8-4d28-8eb9-1c539247e940
13 May 2022
Li, Zhe
a9c524ce-3030-40bb-9bf5-6ca1ebf33d89
Wang, Bo
dc1fccae-55e8-4d28-8eb9-1c539247e940
Li, Zhe and Wang, Bo
(2022)
The influence of foreign institutional investors on audit fees: evidence from Chinese listed firms.
Accounting Forum.
(doi:10.1080/01559982.2022.2071183).
Abstract
This study examines the influence of qualified foreign institutional investors (QFIIs) on investee companies’ audit fees. Using data from China, we find that ownership by QFII-licensed investors is positively associated with audit fees. Besides, audit fees are higher in companies with QFIIs than in those without, and the demand for more extensive audits increases with the number of QFIIs. Notably, the demand for more extensive auditing procedures is mainly attributable to QFIIs from jurisdictions with strong governance institutions or is driven by QFIIs from jurisdictions that are geographically distant from China. Our cross-sectional analysis reveals that this positive influence is more prominent when investee companies exhibit lower earnings quality or a weak sense of corporate social responsibility. Finally, our mediation analysis suggests that QFIIs can enhance firm value and that a portion of this effect is due to the increased audit effort driven by QFIIs.
Text
QFIIs and Audit Fees _ Accepted Version
- Accepted Manuscript
Text
The influence of foreign institutional investors on audit fees evidence from Chinese listed firms
- Version of Record
More information
Accepted/In Press date: 26 April 2022
e-pub ahead of print date: 13 May 2022
Published date: 13 May 2022
Additional Information:
Publisher Copyright:
© 2022 University of South Australia.
Keywords:
Qualified foreign institutional investors, audit fees, firm value, geographical distance, institutional quality, shareholder protection
Identifiers
Local EPrints ID: 456687
URI: http://eprints.soton.ac.uk/id/eprint/456687
ISSN: 0155-9982
PURE UUID: b4abd434-95d3-4357-ac94-4a4a84f37ca5
Catalogue record
Date deposited: 09 May 2022 16:35
Last modified: 17 Mar 2024 04:09
Export record
Altmetrics
Contributors
Author:
Zhe Li
Download statistics
Downloads from ePrints over the past year. Other digital versions may also be available to download e.g. from the publisher's website.
View more statistics
