Product Market Competition,Executive Equity Incentive And Audit Fee

Audit,as an independent economic supervision activity,represents the supervision of the company's owners on the behavior of executives,and is an important external supervision mechanism of the company.High-quality audit service can not only supervise and restrain the behavior of executives,reduce agency costs,but also improve the quality of financial reports and enhance the level of trust of external users of enterprises in accounting information.Audit fees are the remuneration for audit services provided by accounting firms.They are also the link between supply and demand of audit services.Whether audit fees are reasonable or not directly affects the quality of audit services provided by auditors.After Simunic pioneered the research on the influencing factors of audit fees in the 1980 s,the influencing factors of audit fees began to become a hot issue of concern to scholars.Scholars have conducted extensive research on this issue and obtained rich results.The research mainly focuses on corporate characteristics such as earnings management,internal control level,asset size,business complexity and accountant affairs.The impact of the characteristics on audit fees,while the impact of executive equity incentives on internal corporate governance mechanism and product market competition of external corporate governance mechanism is less studied,and no consistent conclusion has been drawn.This paper tries to test the relationship between executive equity incentive,product market competition and audit fees,in order to enrich the research literature on the influencing factors of audit fees.Firstly,from the principal-agent theory,product market competition theory and management incentive theory,this paper theoretically analyses the possible impact of executive equity incentive and product market competition on audit fees.Secondly,select the listed companies that implement executive equity incentive in Shanghai and Shenzhen stock exchanges from 2007 to 2017 as the sample of incentive group,match them with the listed companies that do not implement executive equity incentive by using the method of propensity score matching,obtain the sample of control group,and draw lessons from Simunic(1980)multiple regression model of audit fees,so as to study the relationship between executive equity incentive and audit fees.? At the same time,this paper introduces product market competition as a grouping variable,and divides the sample companies into two groups according to the degree of product market competition.It studies whether the relationship between executive equity incentives and audit fees is different in different product market competition environments.Finally,based on the empirical results and theoretical analysis,some suggestions are put forward.This paper finds that:(1)Compared with the companies without executive equity incentive,the audit fees of executive equity incentive companies are lower,and the implementation of executive equity incentive helps to reduce audit fees and agency costs.(2)Audit fees have a U-shaped relationship with executive equity incentive intensity.When executive equity incentive is in the(0,48.07%)range,audit fees decrease with the increase of executive equity incentive intensity,but when the equity incentive intensity is in the(48.07%,100%)range,audit fees will increase with the increase of executive equity incentive intensity.(3)There is a significant negative correlation between executive equity incentives and audit fees in companies in a fierce product market competition environment,but this relationship is not significant in companies in a low-product market competition environment,indicating that product market competition plays an external governance role and is the guarantee for the better role of executive equity incentives.