Institutional Investors’ Corporate Site Visits,Information Transparency And Audit Fees

Enron scandal,WorldCom event,YinGuangXia affair,Lantian event and other financial information false disclosure case.The significant economic losses caused by the information disclosure problem has aroused widespread concern in theory and practice,also led to the community to the independent audit whether it played a role in the external governance of listed companies have questioned.In order to protect the investors,reduce the degree of information discrepancies and improve the efficiency of capital market operation,governments have introduced laws and regulations that regulate the disclosure of information on listed companies.For example,China securities regulatory commission(CSRC)promulgated the measures for the management of the listed company information disclosure.However,compared with the management of the company,external investors can’t fully understand the actual operating conditions of listed companies.There is an information asymmetry between management and external investors.And institutional investors have gradually become important investment entities in China’s capital market,and the role of improving information transparency and corporate governance,improving the market value of enterprises and protecting the interests of investors are increasingly recognized by the practitioners and scholars.In order to fulfill the fiduciary responsibilities,obtain more dividends,profit in arbitrage,institutional investors have the motivation to use their funds,professional skills,economies of scale and other advantages to search for information.There are two types for institutional investors:one way is to obtain public information,such as financial statements,etc.another way is to dig non-public information,such as through meetings with executives,telephone conferences,site visit and others.However,China’s teleconference has not yet institutionalized,there is no research shows that the institutional investors’ corporate site visits can improve information transparency of listed companies.In addition,the audit fee is used as an economic link between the accounting firm and the audited entity,it not only reflects the input of auditor’s efforts in the audit process,but also reflects potential audit risk the compensation premium required.And the increase of institutional attention to a certain extent reflects the concern of the company has a good fundamentals and development prospects(Michael et al.,2015).Then when the institutional investors’ corporate site visits to help improve the transparency of information,at the same time institutional investors on-site research to a certain extent indicates that the company has a good profit prospects andprospects for development.At this time,because the number of institutional investors’ corporate site visits and the number of institutions involved in site visits increased,auditors reduce the evaluation of material misstatement risk to company,and then change its investment in audit resources and the required risk compensation premium,which ultimately reduces the level of audit fees? Based on this,this paper from the perspective of institutional investors’ corporate site visits as the perspective research information transparency of listed companies and the audit fee.so as to provide empirical evidence for corporate governance effect of institutional investors,and to provide suggestions for relevant departments to improve company information transparency.Based on samples of A-share listed firms in Shenzhen main board from 2011 to2014,this paper investigates whether the institutional investor’ corporate site visits affect the company’s information transparency thereby affecting the audit fees.The results show that increasing the number of institutional investors’ corporate site visits and the number of institutions involved in site visits will significantly improve the next level of information transparency,and will reduce audit fees for the following year,while the current year corporate site visits of institutional investors have no significant effect on the information transparency and audit fees,but the corporate site visit of institutional investors reduced the company’s share price.In addition,the study also found that information transparency plays a mediating role between institutional investors’ corporate site visits and audit fees.Mediating effect accounts for 6% of the overall effect.These conclusions indicate that although a lag effect between the corporate site visit of institutional investors and information transparency and audit fees,but institutional investors’ corporate site visits will not only improve the transparency of corporate information and thus the risk of company information is declined,and in a certain sense also shows that the company has good prospects and thus audit risk is declined.In the end,the audit fee is decreased.