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Bankruptcy reform and audit fees: Evidence from quasi-natural experiment in India

Soumyabrata Basu, Praveen Bhagawan and Jyoti Prasad Mukhopadhyay

Finance Research Letters, 2025, vol. 81, issue C

Abstract: Considering the enactment of the Insolvency and Bankruptcy Code (IBC) in India, we causally assess its impact on Indian firms’ audit fees. Using the difference-in-differences (DiD) technique, we find that financially distressed firms pay lesser audit fees than financially non-distressed firms in India post-bankruptcy reforms. The robustness of our findings is ensured using matching combined with DiD and randomization inference tests. Moreover, we find that IBC has significantly reduced audit fees for distressed firms of smaller size. This decline in audit fees due to the introduction of bankruptcy codes suggests that the benefits of such regulation outweigh its associated costs.

Keywords: Audit fees; Bankruptcy reforms; Distressed firms; Insolvency and bankruptcy code (search for similar items in EconPapers)
JEL-codes: G30 G33 K20 M42 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:81:y:2025:i:c:s1544612325007718

DOI: 10.1016/j.frl.2025.107512

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