||CEO turnover and audit pricing: Further evidence from China
||Department of Accountancy
This study tests the relationship between CEO turnover in client companies and the fees charged by their audit firms, and whether SOEs can attenuate the relationship. We propose that forced CEO turnover brings higher business and audit risks for the audit firm and ultimately leads to higher audit prices. On the other hand, we propose that auditors may face lower risk in engagement due to SOEs’ characteristic. We develop two regression model of audit fees that includes, as predictor variables, type of CEO turnover, SOE dummy and the interaction terms form them, plus some control variables identified in prior studies (e.g., ROA, total assets, and corporate governance). Results show that companies with forced CEO turnover have significantly higher audit fees than companies with either voluntary turnover or no turnover. Further, we find auditors charge lower audit fees when forced CEO turnover is occurred in SOEs
Section 1: Introduction 1
Section 2: Literature review and hypotheses development 3
Section 3: Method 6
Section 4: Results 13
Section 5: Conclusion 20
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