Transporting Audit Quality Across Countries: Returnee CEOs and Audit Fees

Liwei Shan (), Albert Tsang () and Xiaoxue Zhang ()
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Liwei Shan: Southwestern University of Finance and Economics
Albert Tsang: Southern University of Science and Technology
Xiaoxue Zhang: Southwestern University of Finance and Economics

Journal of Business Ethics, 2024, vol. 192, issue 4, No 10, 845-874

Abstract: Abstract Our study finds that relative to firms managed by local CEOs, firms managed by CEOs who have returned from overseas (returnee CEOs) exhibit significantly higher audit fees. We also find this positive association to be stronger for returnee CEOs who manage firms with greater agency problems, have overseas experience in countries with better developed institutions, or have greater business knowledge. Further analyses indicate that firms managed by returnee CEOs tend to exhibit better financial reporting quality, lower propensities for financial fraud, and fewer earnings restatements in subsequent years. In addition, firms managed by returnee CEOs are associated with greater internationalization and higher propensities for seasoned equity offerings (SEOs) than firms managed by local CEOs. Overall, our findings are most consistent with the conjecture that returnees tend to bring ethics and practices that ensure higher financial reporting quality back to their home countries. Our findings offer a plausible explanation that returnee talents could increase firm value.

Keywords: Returnee CEO; Overseas experience; Audit fees; Agency problem; International knowledge transfer (search for similar items in EconPapers)
JEL-codes: G10 G30 G41 J15 M42 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10551-023-05532-8

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