Dual-class ownership structure and audit fees

A dual-class share structure creates a separation between cash flow rights and voting rights. Dual-class firms impact audit fees through their effect on supply/demand for auditing. This article examines the association between audit fees and dual-class share structure for U.S. public firms. We find that a dual-class share structure is associated with lower audit fees compared to single-class firms. Further, within dual-class firms, we find that the divergence between cash flow rights and voting rights is negatively associated with audit fees. The results are consistent with the managerial incentive-alignment effect and/or the insulation effect of a dual-class share structure on the supply/demand for audit services. This study highlights that the ownership structure of a firm constitutes an important role in audit pricing.