The Overseas Experience of Audit Committee and Audit Fees: Empirical Evidence from China

Chengai Li,Meilan Chen,Lin Pan,Lei Xie

doi:10.1155/2021/5454418

Chengai Li, Meilan Chen + Show 2 more

Open Access

https://doi.org/10.1155/2021/5454418

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Abstract

The complexity of audit committee experience, including the overseas experience, has an important impact on corporate governance. In this paper, we study the impact of the overseas experiences of the members of audit committee on audit fees. Our empirical analysis and results show that the audit committee overseas experience can significantly increase audit fees. Further, the positive influence of the audit committee overseas experience on audit fees is more pronounced in state-owned enterprises and regions with weak marketization. In addition, we divide the overseas experience into overseas learning experience and overseas working experience. We find that both types of experience present in the audit committee significantly increase the audit fees. Finally, we find that the audit committee overseas experience can significantly improve the quality of accounting information and play a positive role in corporate governance.

Highlights

Since the reform and opening-up, China has made remarkable progresses in its economic and social development, which are inseparable from the advanced technologies and management experience from a large number of overseas returnees. e 2018 Statistical Bulletin of Human Resources and Social Security Development issued by the Ministry of Human Resources and Social Security showed that about 3.65 million Chinese have chosen to return to China to start their careers between 1978 to the end of 2018 [1]
To minimize the sample selection problem, the information of audit committee members of the companies in the year are sorted out manually and determined based on the time of assumption of duty and the time of leaving the post of executives in CSMAR), we use the information about the appointment and departure time of audit committee members from CSMAR to judge the names of audit committee members. ese names are matched with the individual characteristic data of executives in CSMAR, and the variable of audit committee overseas experience (OVERSEA) is obtained. e variable of accounting firm change (CHANGE) is obtained manually after excluding merges and renaming. e other financial indexes in this study are from CSMAR
Based on the criterion on whether the audit committee members have overseas experience, the samples are divided into two groups, and the statistics is made on the mean and median of Variable Audit fees Audit committee overseas experience Audit committee overseas experience ratio Marketization process

Summary

Introduction

Since the reform and opening-up, China has made remarkable progresses in its economic and social development, which are inseparable from the advanced technologies and management experience from a large number of overseas returnees. e 2018 Statistical Bulletin of Human Resources and Social Security Development issued by the Ministry of Human Resources and Social Security showed that about 3.65 million Chinese have chosen to return to China to start their careers between 1978 (the year of reform and opening-up) to the end of 2018 [1]. Since the reform and opening-up, China has made remarkable progresses in its economic and social development, which are inseparable from the advanced technologies and management experience from a large number of overseas returnees. With more and more overseas talents returning to China, the influence of returnees on China’s macroeconomy and microenterprise behavior has been studied extensively in the literature [2, 3]. E complex experience of executives affects their values, knowledge structure, management philosophy, and social relations, which influence the decision-making and development of enterprises [4]. The existing literature has indicated that returned executives influenced by the individualism thinking of Western countries show greater awareness in risk taking and supervision [11, 12]

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