Hometown sentiment: CEO hometown identity and company audit fees

Lv, Jingxin; Zhang, Shuang

doi:10.1108/maj-01-2022-3431

Cited by 7 publications

(3 citation statements)

References 43 publications

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“…Similarly, Zhu et al (2022) find that when the CEO and chairperson share the same hometown, the likelihood of CEO dismissal decreases, emphasizing the significance of social connections in mitigating CEO turnover. Furthermore, Lv et al (2022) note that if a company's headquarters are situated in the same province as the CEO's hometown, the company tends to pay lower audit fees. This observation could be attributed to a hometown CEO's heightened focus on reputation management and the maintenance of positive social network relationships, leading to reduced audit costs.…”

Section: Literature Review and Hypothesis Development 21 The Importan...mentioning

confidence: 99%

Hometown religiosity and financial reporting quality: evidence from chairpersons

Arioglu,

Borak,

Ocak

2024

MAJ

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Purpose This study aims to investigate whether there is a relationship between the religiosity levels of chairpersons’ hometowns and the financial reporting quality of companies. Design/methodology/approach Using a unique hand-collected data set obtained from various sources, the authors use ordinary least squares and logistic regressions to test the hypotheses and further implement various methods to address potential issues such as omitted variables, reverse causality and selection bias problems. In addition, the authors control for the religiosity level of chief executive officers’ (CEOs) hometowns. Finally, the authors divide the sample into two subsamples – companies with strong corporate governance and companies with weak corporate governance – to investigate the effect of chairpersons’ hometown religiosity on financial reporting quality under strong or weak corporate governance. Findings The findings demonstrate that companies with chairpersons from religious hometowns produce high-quality financial reports. Additional tests, such as the Heckman selection model and instrument variable regression, confirm the robustness of the main results. Controlling for the religiosity level of the CEO’s hometown yields consistent findings with the main results. Finally, additional results indicate that the religiosity levels of chairpersons’ hometowns play a significant role in enhancing financial reporting quality in companies with weak corporate governance. Practical implications Companies should consider appointing board members or chairpersons from more religious hometowns, as the empirical results of this study support the positive effects of chairpersons’ hometown religiosity on financial reporting quality. Originality/value To the best of the authors’ knowledge, the current study is among the first to demonstrate the relationship between the religiosity level of the chairpersons’ hometown and the financial reporting quality of companies. The study introduces unique hometown religiosity proxies and controls for various variables related to corporate governance, chairperson attributes, company characteristics, and audit firm characteristics.

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Section: Literature Review and Hypothesis Development 21 The Importan...mentioning

confidence: 99%

Hometown religiosity and financial reporting quality: evidence from chairpersons

Arioglu,

Borak,

Ocak

2024

MAJ

View full text Add to dashboard Cite

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“…Previous studies on peer relationships, former colleagues and alumni relationships have focused only on the economic consequences of the existence of personal relationships (Cai, Xie, & Ma, 2015;Guan, Su, Wu, & Yang, 2016;Wu, Wang, & Lu, 2015). A small number of studies have focused on the impact of CEO hometown identity on corporate audit costs, but existing studies have paid more attention to the impact of the existence of CEO-managers' hometown relationship, while ignoring the impact of major characteristics of social relationships such as strength and density of the hometown relationship (Lv, Zhang, & Zhang, 2022;Yuan, Xu, Chen, Liu, & Liu, 2018). To sum up, both types of studies focus too much on the impact of the existence of personal relationships on audit quality, while relatively ignoring the impact of strength and density of personal relationships, which is not conducive to accurately grasp the panorama of the impact of personal relationships, especially hometown relationships, on audit quality.…”

Section: Literature Reviewmentioning

confidence: 99%

The Impacts of Characteristics of Hometown Connectedness Between Auditors and Executives on Audit Quality: Evidence From China

2023

ijafr

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Quality audit depends on the qualified audit team. Hometown connectedness affects audit quality among executives and auditors. Higher auditor-executive hometown connectivity degrades audit quality more. The present study aimed to analyse and test the influence of the strength and density of auditors-managers hometown connectedness on audit quality. Panel data research methods were employed here. The data is analyzed using the Regression model, including the Logit regression model and OLS regression model, Pearson correlation coefficients, χ2 grouping test and Heckman two-step regression, by using 3674 observations of the Chinese Stock markets from 2008 to 2020 and from the perspective of sociology and economics that were reserved over 15 different industries and the auditor-manager hometown connectivity involved 25 different provinces. The present study reveals that the auditors-manager's hometown connectedness has a negative effect on audit quality. The influence degree increases along with the strength of the auditors-manager's hometown connectedness. Secondly, the influence degree increases along with the density of auditors-managers hometown connectedness. Finally, some suggestions related to audit quality supervision are put forward. The above findings are still valid after controlling for potential endogenous problems. The research on the relationship between auditors-managers' hometown connectedness and audit quality is extended and deepened. The present study's findings apply to auditors and executives in that a bias-free relationship is essential to carry out an influence-free audit process. Audit organizations and business organizations can benefit from this research.

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“…Complexity of operations (CP) indicates the complexity of a company's audit engagements. Following Lv et al (2022), our measurement involves summing accounts receivable and inventory, then dividing the total by total assets. As auditors face more complex engagements, they require more time to understand the business, identify and assess significant misstatement risks, and follow more procedures.…”

Section: Control Variablementioning

confidence: 99%

Annual report inquiry letters, disclosure of key audit matters and audit fees: Evidence from Chinese A-share listed companies

Li,

Gou,

Wang

2023

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Research background: Issuing an annual report inquiry letter is a powerful means by which securities exchanges regulate the information of listed companies, which can convey information, reveal risks, and sustain the orderly development of capital markets. However, research on the economic consequences is limited. Purpose of the article: This study analyses the relationships and mechanisms between annual report inquiry letters, key audit matters (KAMs), and audit fees. Methods: We collected data from Chinese A-share companies listed on the Shanghai and Shenzhen Stock Exchanges between 2017 and 2022, totalling 9,903 observations. We used Stata to conduct mediation effects and heterogeneity tests on the data. We also conducted further research on the relationship between audit fees and the purchase of audit opinions. Findings & value added: The results indicate that (1) companies that receive annual report inquiry letters have higher audit fees. Furthermore, (2) companies that receive annual report inquiry letters are more likely to increase the number of disclosed KAMs, leading to higher audit fees. Finally, (3) the above relationship is more significant amongst companies audited by non-Big-Four accounting firms than amongst those audited by Big-Four accounting firms. Further, the increase in audit fees for the sample companies is not due to the purchase of audit opinions and is combined with robustness tests, further validating the conclusions of this study. These findings contribute to research on the economic impact of implementing the annual report inquiry system and new auditing standards, providing empirical evidence for the effectiveness of government oversight of capital markets.

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Hometown sentiment: CEO hometown identity and company audit fees

Cited by 7 publications

References 43 publications

Hometown religiosity and financial reporting quality: evidence from chairpersons

Hometown religiosity and financial reporting quality: evidence from chairpersons

The Impacts of Characteristics of Hometown Connectedness Between Auditors and Executives on Audit Quality: Evidence From China

Annual report inquiry letters, disclosure of key audit matters and audit fees: Evidence from Chinese A-share listed companies

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