On the persistence and dynamics of Big 4 real audit fees: Evidence from the UK |
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| Authors: | Marek Kacer David A. Peel Michael J. Peel Nicholas Wilson |
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| Affiliation: | 1. Credit Management Research Centre, University of Leeds, UK;2. Department of Finance, Faculty of National Economy, University of Economics in Bratislava, Slovakia;3. Management School, Lancaster University, UK;4. Cardiff Business School, Cardiff University, UK |
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| Abstract: | Despite the huge audit pricing literature, there is a dearth of evidence on the temporal dynamics of audit fee adjustments and the persistence of audit fees. Based on a sample of 76,867 panel observations for a sample of UK companies audited by the Big 4 over the period 1998 to 2012, we employ consistent lagged dependent variable panel estimators to provide new evidence on the persistence and dynamics of real Big 4 audit fees. Contrary to extant research, which assumes that audit fees adjust immediately in a single period, our empirical results indicate that Big 4 real audit fees are persistent, being partly dependent on their previous realisations. We conclude that static audit fee models omit a potentially important temporal dimension of audit pricing behaviour and that further research is warranted into dynamic audit fee models across other jurisdictions. |
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| Keywords: | adjustment speed Big 4 dynamic panel estimates listed and unlisted companies partial adjustment persistence real audit fees |
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