Media coverage of corporate social irresponsibility and audit fees: International evidence

Abstract

This study uses a large sample of firms from 35 countries to examine how media coverage of corporate social irresponsibility (CSI) affects audit fees. We document a positive and significant relationship between media coverage of CSI and audit fees. Further evidence indicates that this positive relationship is less pronounced for firms with a higher level of commitment to corporate social responsibility (CSR) performance but is more pronounced for firms domiciled in countries with stronger investor protections, higher regulatory quality and higher CSR disclosure requirements. Taken together, these findings support the conjecture that CSI media coverage increases auditors' risk and thereby increases audit fees. Moreover, our findings suggest that the effect of media coverage of CSI on audit fees varies with country‐level institutional characteristics and the degree of firms' substantive commitment to CSR performance.