Association between executives’ foreign background and audit fees

Abstract

Purpose This study aims to investigate the association between executives with foreign backgrounds and the audit fees paid by the Chinese-listed firms over the period from 2010 to 2020. Design/methodology/approach To examine the association between executives’ foreign experience and audit fees, this study constructs the following empirical model: Lnfeei,t = β0 + β1Foreign backgroundi,t + ∑βj Controli,t + YearFE + IndFE + εi,t (1). Findings This study finds that auditors charge higher fees for firms hiring more executives with foreign backgrounds. The results are robust to a battery of robustness checks, including fixed effects, alternative measures of independent variable, controlling for other characteristics of executives and auditors and entropy balancing method. Originality/value This study sheds light on how executives’ foreign backgrounds affect audit fees, enriching the literature on executive heterogeneity and audit fees and providing important implications for audit practitioners.