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- Title
Cross-Listing Audit Fee Premiums: Theory and Evidence.
- Authors
Jong-Hag Choi; Jeong-Bon Kim; Xiaohong Liu; Simunic, Dan A.
- 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.
- Subjects
AUDITING; USER charges; QUALITY of service; AUDITORS; LEGAL liability; MATHEMATICAL models
- Publication
Accounting Review, 2009, Vol 84, Issue 5, p1429
- ISSN
0001-4826
- Publication type
Article
- DOI
10.2308/accr.2009.84.5.1429