J. Zhang
Does board independence affect audit fees? Evidence from recent regulatory reforms
Zhang, J.; Yu, Y.
Authors
Y. Yu
Abstract
To enhance board oversight, since 2002, US legislation has required listed companies to have a majority independent board. This paper uses this legislative change to examine the relation between board independence and audit fees. To provide a clean estimate of this relation, we adopt a difference-in-difference approach using a sample matched on client firm characteristics. We find that greater board independence is insignificantly associated with a change in audit fees when client firms operate in a weak information environment. When the information environment is strong, greater board independence is associated with an increase in audit fees. Our results are consistent with the nascent theory emphasizing information asymmetry and provide insight into the effectiveness of the mandated board independence in relation to audit quality.
Citation
Zhang, J., & Yu, Y. (2016). Does board independence affect audit fees? Evidence from recent regulatory reforms. Financial Markets, Institutions and Instruments, 25(4), 793-814. https://doi.org/10.1080/09638180.2015.1117007
Journal Article Type | Article |
---|---|
Acceptance Date | Oct 16, 2015 |
Online Publication Date | Jan 14, 2016 |
Publication Date | Oct 1, 2016 |
Deposit Date | Oct 26, 2015 |
Publicly Available Date | Jul 14, 2017 |
Journal | Financial Markets, Institutions and Instruments |
Print ISSN | 0963-8008 |
Electronic ISSN | 1468-0416 |
Publisher | Wiley |
Peer Reviewed | Peer Reviewed |
Volume | 25 |
Issue | 4 |
Pages | 793-814 |
DOI | https://doi.org/10.1080/09638180.2015.1117007 |
Public URL | https://durham-repository.worktribe.com/output/1419333 |
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Copyright Statement
This is an Accepted Manuscript of an article published by Taylor & Francis Group in European Accounting Review on 14/01/2016, available online at: http://www.tandfonline.com/10.1080/09638180.2015.1117007.
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