A test of the free cash flow and debt monitoring hypotheses: Evidence from audit pricing

• 成果类型: Article
• 署名作者: Gul, FA; Tsui, JSL
• 署名单位: City University of Hong Kong
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/S0165-4101(98)00006-8
• 发表日期: 1997
• 关键词: investment opportunity set; australian market; AGENCY COSTS; policies; prices; size

摘要

This study examines the association between free cash flow (FCF) and audit fees. The association is expected given Jensen's argument that managers of low growth/high FCF firms engage in non-value-maximizing activities. These activities increase auditors' assessments of inherent risk and, in turn, audit effort and fees. Jensen also argues debt mitigates the non-value-maximizing activities. Thus, the positive FCF/audit fees association is expected to be weaker for low growth firms with high debt than for similar firms with low debt. Regression results for a sample of low growth Hong Kong firms support these hypotheses. (C) 1998 Elsevier Science B.V. All rights reserved.