Do Abnormal IPO Audit Fees Signal IPO Audit Quality and Post-IPO Performance? A Principal-Agent Analysis Based on Evidence from China
| Autor: | K. Hung Chan, Phyllis Lai Lan Mo, Weiyin Zhang |
|---|---|
| Rok vydání: | 2020 |
| Předmět: |
050208 finance
business.industry media_common.quotation_subject 05 social sciences Principal–agent problem Accounting 050201 accounting Audit Litigation risk analysis Independence Quality audit health services administration 0502 economics and business Business Business and International Management China Initial public offering media_common |
| Zdroj: | Journal of International Accounting Research. 20:1-29 |
| ISSN: | 1558-8025 1542-6297 |
| DOI: | 10.2308/jiar-2020-054 |
| Popis: | We assess the unexplained information content of abnormal audit fees using a sample of initial public offering (IPO) audits in China. We find that abnormal IPO audit fees are positively associated with manipulation of pre-IPO real activities, suggesting lower audit quality for IPO financial statements. We further find that abnormal IPO audit fees are negatively associated with post-IPO financial performance. These results suggest a strong alignment of interests between the principal (pre-IPO shareholders), whose main interest is to gain listing status, and its agent (the auditor), who is willing to cooperate with the principal for extra economic rents (abnormal audit fees). Our findings that abnormal IPO audit fees are associated with lower audit quality and can help predict post-IPO financial performance have important implications for audit regulators, IPO market participants, and the applicability of agency theory in the context of IPO audits. JEL Classifications: M43; M49. |
| Databáze: | OpenAIRE |
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