Economics at your fingertips  

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

Rasheed Alrashidi, Diogenis Baboukardos and Thankom Arun

Journal of International Accounting, Auditing and Taxation, 2021, vol. 43, issue C

Abstract: 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 tests.

Keywords: Access to finance; Audit fees; Non-audit fees; India (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1016/j.intaccaudtax.2021.100397

Access Statistics for this article

Journal of International Accounting, Auditing and Taxation is currently edited by R. Larson

More articles in Journal of International Accounting, Auditing and Taxation from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

Page updated 2021-10-26
Handle: RePEc:eee:jiaata:v:43:y:2021:i:c:s1061951821000227