Controlling Shareholder's Stock Pledge And Audit Fee Based On The Perspective Of Product Market Competition

At present,with the tightening of China's bank credit policy,increasingly strict financial supervision and economic downward pressure,most of the domestic enterprises are facing financing constraints.Stock pledge,as a convenient and fast way of financing,has been popular in the capital market since it came into being.However,the stock price dropped seriously in 2015,and most stocks faced the situation of forced liquidation and transfer of control right.Only then did people gradually realize the risk of stock pledge of controlling shareholders.At the same time,as China's financial regulation and investor protection system are not perfect,the stock pledge of the controlling shareholders will enhance the motivation of the controlling shareholders to "tunneling" the listed company and damage the interests of minority shareholders.By the end of 2018,about 1958 controlling shareholders of A-share listed companies hold stock pledge,and A-share listed companies that hold the controlling shareholder's stock pledge account for more than 50%of the total number of A-share listed companies.How to measure,prevent and manage the risk of stock pledge of controlling shareholders has become a hot topic concerned by the society and academia.For third-party intermediary auditors,the risk-oriented audit mode requires them to consider the risks brought by the pledge of shares of controlling shareholders,and then choose to increase audit input in high-risk areas,take more audit measures and increase audit fees to reduce the risks to the acceptable audit range.Therefore,from the perspective of auditors,this paper studies the relationship between stock pledge of controlling shareholders and audit fees,which on the one hand can help deepen the research on the economic consequences of stock pledge of controlling shareholders.And on the other hand,it is also possible to measure the risk of controlling shareholder's stock pledge based on the perspective of an external auditor.But due to different industries and market positions,each enterprise faces different product market competition.The differences in product market competition faced by enterprises may affect the "second type of agency problem" and the degree of enterprise earnings management caused by the stock pledge of controlling shareholders,thereby affecting the audit risk and influencing the relationship between the stock pledge of controlling shareholders and the audit fee.Therefore,based on the 2003 to 2017 A-share listed companies as samples,we research on the relationship among the controlling shareholder's stock pledge,product market competition and audit fees,to provide suggestions for auditors to reasonably price,pledgee to strengthen risk management,and financial regulators to supervise effectively.The empirical results of this paper show that the audit fee is greater for a listed company with a controlling shareholder's stock pledge,and the higher the stock pledge proportion of controlling shareholders,the higher the audit fee.Secondly,this paper analyzes the duration of the controlling shareholder's stock pledge and finds that the longer the stock pledge lasts for,the higher the audit fee will be.Finally,after the introduction of "product market competition" variable,the paper finds that market competition between the industries will strengthen the positive correlation between the stock pledge of the controlling shareholders and the audit fee.But market competition within the industry will weaken the positive correlation between the stock pledge of the controlling shareholders and the audit fee.