Market Competition, Audit Fee Stickiness, and Audit Quality : Evidence from China

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

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Original languageEnglish
Pages (from-to)79-99
Journal / PublicationAuditing: A Journal of Practice & Theory
Issue number2
Online publishedJun 2018
Publication statusPublished - May 2019


This study examines how audit fee stickiness varies with changes in market competition in China and its effect on audit quality. The Chinese audit market structure has changed significantly since the Chinese Institute of Certified Public Accountants (CICPA) issued a proposal to enhance the competitiveness of large domestic audit firms by promoting the consolidation of domestic audit firms in 2007. Using a sample of Chinese listed firms, we find a decrease in upward stickiness and an increase in downward stickiness as market concentration increases in the post-Proposal period. The asymmetry between upward and downward fee stickiness is greater in local markets that are more dominated by the top 10 domestic auditors. Moreover, we find that upward (downward) fee stickiness has a negative (positive) association with audit quality as measured by earnings management and auditor reporting conservatism.

Research Area(s)

  • audit fee stickiness, audit quality, China, CICPA, market competition

Bibliographic Note

Research Unit(s) information for this publication is provided by the author(s) concerned.