A Study of Related Party Transactions, Operational Risks and Audit Fees from the Perspective of the Nature of Ownership

Xia Zhu () and ZiHui Zhao ()
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Xia Zhu: Guilin University of Electronic Technology, Business School
ZiHui Zhao: Guilin University of Electronic Technology, Business School

A chapter in Proceedings of the 2023 3rd International Conference on Financial Management and Economic Transition (FMET 2023), 2024, pp 21-31 from Springer

Abstract: Abstract The related party transaction model may exacerbate the operational risk of listed companies in terms of bargaining power, conversion of related investment costs, etc., which in turn may affect audit fees. Studies have focused on the impact of related party transactions on audit behaviour, with little literature focusing on the mechanisms at play. This paper empirically analyzes the impact of related party transactions on audit fees based on the operational risk theory perspective by selecting relevant data of manufacturing companies listed in Shanghai and Shenzhen A-shares from 2012-2021. The results show that related party transactions significantly exacerbate the concentration of business risk in firms, which in turn raises audit fees, i.e. business risk plays a mediating role in the impact of related party transactions on audit fees. Further study, after distinguishing the nature of ownership, the empirical results show that the positive relationship between related party transactions and audit fees is more significant in non-state owned enterprises, providing empirical evidence to support reasonable audit pricing by auditors.

Keywords: Related party transactions; audit fees; operational risk; nature of ownership (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-272-9_4

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DOI: 10.2991/978-94-6463-272-9_4

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