Corporate lobbying: Resource-seeking or rent-seeking? Evidence from audit fees |
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| Institution: | 1. Deakin University, 221 Burwood Hwy, Burwood, Victoria 3125, Australia;2. Sunway University, 5, Jalan Universiti, Bandar Sunway, 47500 Petaling Jaya, Selangor, Malaysia;1. College of Business and Economics, Australian National University, Australia;2. UQ Business School, The University of Queensland, Australia;3. Peter T. Paul College of Business and Economics, University of New Hampshire, USA;4. University of South Australia, Australia;1. Graduate School of Science in Taxation, University of Seoul, 163 Seoulsiripdaero, Dongdaemun-gu, Seoul 02504, Republic of Korea;2. School of Business Administration, Chonnam National University, 77, Yongbong-ro, Buk-gu, Gwangju 61186, Republic of Korea;1. Department of Business Administration, National Chung Cheng University, Taiwan;2. Department of Economics, National Chengchi University, Taiwan;1. College of Business, Hankuk University of Foreign Studies, South Korea;2. Department of Management, Korea National Open University, South Korea;3. Department of Business Administration, Sejong University, South Korea;4. Department of Business Administration, Inha University, South Korea;1. University of Nottingham Ningbo China, 199 Taikang East Road, Ningbo 315100, China;2. Communication University of China, Nanjing, Hongjing Avenue, Jiangning District, number 3666, Nanjing City, China |
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| Abstract: | Theory and prior research suggest that corporate lobbying is a primary means that corporations use to influence government policies either for improving firm performance (i.e., strategic decisions) or for rent-seeking activities (i.e., agency costs) but the evidence between lobbying activities and auditor assessments of audit risk remains unclear. Our results show that lobbying firms are associated with higher audit risks and fees, consistent with the idea that lobbying is related to rent-seeking and higher agency costs. In cross-sectional analyses, we find that the positive association between lobbying and audit fees is weaker for firms with strong corporate governance. Further analysis shows that firm financial returns or low earnings quality mediate the relationship between lobbying and audit fees. The results suggest that practitioners, users of financial statements and regulators could benefit by recognizing that lobbying activities could signal managerial opportunistic behavior. |
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| Keywords: | Corporate lobbying Audit fee Audit risk Independent board Female director Audit committee Earnings management |
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