The financialization of entity enterprises and audit fees

Abstract

This paper studies the impact of entity enterprises financialization on audit fees and its internal mechanisms. We use the data of China's Shenzhen A-share listed companies from 2013 to 2018 to conduct empirical research. It is found that the higher the degree of financialization of the entity enterpeises, the higher the audit cost of the enterprise. The internal mechanism is that the level of the non-financial financialization is rising, leading to the reduction of information transparency of enterprises, which increases the audit risk faced by certified public accountants, so as to raise audit fees for risk compensation and self-protection. This paper provides a new perspective for understanding the financialization of entity enterprises, enriching the research results on financialization and audit fees of entity enterprises. The relevant conclusions have certain reference value for listed companies and regulatory authorities.