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Audit fees, non-audit fees and access to finance: Evidence from India

Alrashidi, Rasheed and Baboukardos, Diogenis and Arun, Thankom (2021) 'Audit fees, non-audit fees and access to finance: Evidence from India.' Journal of International Accounting, Auditing and Taxation, 43. p. 100397. ISSN 1061-9518

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This paper examines the impact of audit and non-audit fees on firms’ ability to access finance by reducing their capital constraints. Unlike previous studies, which examined this phenomenon in developed economies, this paper focuses on one of the largest, albeit developing, economies in the world: India. India is an interesting empirical setting due to major concerns over the quality of the audit services offered, even by the Big 4 accounting firms. Following the limited attention theory, we argue that, in such settings where the effect of the Big 4 label is limited, capital providers will turn their attention to the fees paid as a more reliable proxy for audit effort. Employing a dataset of listed non-financial Indian firms from 2002 to 2017, we hypothesise and empirically demonstrate that both audit and non-audit fees are negatively associated with firms’ financial constraints. The findings indicate that finance providers see audit and non-audit fees as signals of high-quality audits that enhance the credibility of financial statements and in turn positively impact firms’ access to finance. The results remained unchanged after a battery of robustness

Item Type: Article
Uncontrolled Keywords: Access to finance; Audit fees; Non-audit fees; India
Divisions: Faculty of Social Sciences
Faculty of Social Sciences > Essex Business School
Faculty of Social Sciences > Essex Business School > Essex Accounting Centre
SWORD Depositor: Elements
Depositing User: Elements
Date Deposited: 29 Mar 2021 11:46
Last Modified: 06 Jan 2022 14:23

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