Social Media Attention And Audit Fees

With the development of the Internet,social media such as stock bars and snowballs have started to become important Internet information intermediaries,changing the information supply pattern of the capital market,reducing the cost of information delivery as well as access for small and medium-sized investors,and playing an increasingly important role in shaping the information environment of the capital market.As of June 2022,the size of China’s online news users has reached 788 million,accounting for 75.0% of the overall Internet users.The rapidly increasing Internet penetration rate and the higher scale of news users have promoted the development of social media such as stock bars,and social media has become an important information dissemination platform,and the economic consequences of which have aroused widespread concern.Meanwhile,as the gatekeeper of listed companies’ financial statements,the auditor is an important player in the capital market by issuing audit reports to improve the credibility of the company’s financial statements and transmit information to investors.Audit fees are a reflection of the auditor’s audit risk and a guarantee of a high quality audit by the auditor,yet there may be a phenomenon of low price solicitation by the auditor in the market,resulting in the auditor may not be able to effectively perform the market supervision function.Social media,as a shaper of the external corporate environment and an important information platform in the capital market,may have an impact on the behavioral decisions of the audited company as well as the auditor,which provides new ideas for studying the influencing factors of audit fees.However,for the time being,the academic community has not yet reached a consensus on the conclusions of research on the economic consequences generated by social media.Some scholars believe that the information published on social media and the formation of online opinion will attract the attention of small and medium-sized investors to the relevant listed companies,while the large number of discussions may form "group wisdom",reduce the cost of information acquisition and improve the information processing ability of investors,thus improving the efficiency of the capital market and enhancing corporate governance.However,some scholars believe that social media can negatively affect corporate governance by exerting pressure.Therefore,this paper examines the following questions:(1)Does social media attention affect audit fees?(2)If social media attention affects audit fees,what are the specific impact paths?(3)Does the relationship between social media attention and audit fees differ across firms with different sizes of accounting firms,quality of audited firms’ internal controls,analyst attention,and institutional investors’ shareholdings?This paper measures social media attention using relevant data from the China Research Data Service Platform(CNRDS)database stock forum from 2010 to 2020,compares the theoretical foundations related to information asymmetry theory,risk-based audit theory,audit insurance demand theory,reputation mechanism theory,etc.,and empirically examines the impact of social media attention on audit fees by combining relevant domestic and international literature,and also examines the impact of social media attention on audit fees from The three possible transmission mechanisms,namely the level of surplus management,auditor’s perception of reputation risk and auditor’s perception of regulatory risk,are explored from both firm and auditor perspectives,and the differences in the impact of social media attention on audit fees are further analyzed under different levels of internal control,the degree of analyst tracking,the percentage of institutional investors’ shareholding and the size of accounting firms.The main findings of this paper then show that(1)social media attention is significantly and positively related to audit fees,i.e.,the higher the social media attention to the audited firm,the higher the auditor’s audit fees;these findings still hold after a series of robustness and endogeneity tests such as replacing variables,distinguishing posting tone,lagging one period,firm-year fixed effects,propensity score matching,and instrumental variable regression;(2)Further mechanistic analysis reveals that social media attention can increase auditors’ audit fees by directly and indirectly influencing auditors’ risk perceptions through the paths of increasing audited firms’ surplus management,increasing auditors’ reputation risk perceptions,and auditors’ regulatory risk perceptions;(3)In non-Big 4 firms audited as well as those with lower levels of internal governance,lower analyst tracking,and lower institutional investor firms with lower shareholdings,the impact of social media attention on audit fees is more pronounced.