The Short-Selling Mechanism,Agency Conflicts And Audit Fees

Margin trading has been popular in developed countries for a long time.China officially launched the securities lending business on March 31,2010.The introduction of the short-selling mechanism is a milestone event for China's securities market.Foreign academic circles have done a lot of research on the economic consequences of breaking short-selling restrictions.Although China just allowed margin trading in recent years,studies on the short-selling mechanism have become more and more with the rare quasi-natural experiment opportunity.Some researchers associated the short-selling mechanism with the company's audit fees,but they didn't establish a DID model.In this paper,the model design and the empirical process are improved.After selecting the data of all A-share listed companies from 2009 to 2017 for the sample pairing,the DID model is established to test the impact of the short-selling mechanism on audit fees.In addition,this paper innovatively tests the impact of short-selling mechanism on abnormal audit fees and the adjustment function of two types of agency conflicts(agency conflicts between shareholders and management,agency conflicts between major shareholders and minority shareholders).The study finds that:The short-selling mechanism has increased the audit fees and positive abnormal audit fees of margin trading target enterprises.When the shareholding ratio of the senior management is higher,the price-increasing effect will be reduced.When the stockholder's rights concentration degree is very low,the price-increasing effect exists.But when the stockholder's rights concentration degree is temperate or very high,the price-increasing effect will disappear.The study shows that:Breaking short-selling restrictions raises the potential litigation risk of auditors.In response to the the potential litigation risk,auditors will cost more to improve audit quality.They require risk and cost compensation in audit pricing when the enterprise is a margin trading target.The degree of agency conflicts between shareholders and management and the degree of agency conflicts between major shareholders and minority shareholders can influence the price-increasing effect.The research in this paper enriches the economic consequences of loose short-selling control,the influencing factors of audit fees,and the influencing factors of abnormal audit fees.It provides some basis for China to improve short-selling mechanism and standardize audit market in the future.