Cross-Listing Audit Fee Premiums : Theory and Evidence

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

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Detail(s)

Original languageEnglish
Pages (from-to)1429-1463
Journal / PublicationAccounting Review
Volume84
Issue number5
Online publishedSep 2009
Publication statusPublished - Sep 2009

Abstract

We study the effects of cross-listings on audit fees. We first develop a model in which legal environments play a crucial role in determining the auditor's legal liability. Our model and analysis predict that auditors charge higher fees for firms that are cross-listed in countries with stronger legal regimes than they do for non-cross-listed firms and that the cross-listing audit fee premium increases with the difference in the strength of legal regimes between the cross-listed foreign country and the home country. We then empirically test these predictions. The results of our cross-country regressions strongly support our predictions. In addition, we find no significant cross-listing fee premium for firms that are cross-listed in countries whose legal regimes are no stronger than those of their home countries. This suggests that cross-listing audit fee premiums are associated with increased legal liability and not with increased audit complexity per se. Our findings help explain why cross-listing premiums occur and what determines their magnitude.

Research Area(s)

  • Audit fee, Audit quality, Cross-listing, Legal regime

Bibliographic Note

Full text of this publication does not contain sufficient affiliation information. With consent from the author(s) concerned, the Research Unit(s) information for this record is based on the existing academic department affiliation of the author(s).

Citation Format(s)

Cross-Listing Audit Fee Premiums : Theory and Evidence. / Choi, Jong-Hag; Kim, Jeong-Bon; Liu, Xiaohong; Simunic, Dan A.

In: Accounting Review, Vol. 84, No. 5, 09.2009, p. 1429-1463.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review