The impact of ultimate ownerships on audit fees: evidence from Chinese listed companies

This paper investigates the relationships between ultimate ownerships and audit fees (ADFEE). Using the data of 1428 Chinese listed companies in 2008, our empirical results show ADFEE are lowest for companies controlled by central government, followed by companies controlled by local government. In addition, we reveal that the longer the control chain from the listed company to its ultimate owner, the higher the ADFEE that company will pay. We also find that there is a negative relationship between the discrepancy and ADFEE when we pool our sample together. However, when we divide our samples into large firms and small firms, we find that such a negative relationship only holds for big-size firms while for small-size firms, ADFEE are positively correlated. This discrepancy being due to small firms' lack of bargain power and the increase in auditing risk. In addition, we find that company size moderates the effect of such discrepancies on ADFEE in a nonlinear fashion.