Corruption, Accounting Firm Size and Audit Fee Premium—Evidence from Chinese Listed Companies

Abstract

China is playing an increasingly important role in the global economy and the economic transfor-mation becomes the most pressing need at this stage. " Corruption governance " , and " anti-corrup-tion " are hot topics which are discussed by people from all works of life. The main purpose of this paper is to examine the relationship between corruption and audit fee premium under the back-ground of China's special institutional environment. Based on firms listed on the Shanghai and Shenzhen Stock Exchanges from 2007-2012, the paper verifies that compared with the domestic accounting firms, the international big four firms charge higher audit fees. More importantly, the empirical result finds that corruption has a positive effect on the relationship between firm size and audit fee premium. In other words, corruption governance will decrease the audit fee pre-mium. This study contributes to improved understanding of the influence of anti-corruption wave in China.