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Journal of Business Ethics

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04.03.2019 | Original Paper

Loan Guarantees, Corporate Social Responsibility Disclosure and Audit Fees: Evidence from China

verfasst von: Fangjun Wang, Luying Xu, Fei Guo, Junrui Zhang

Erschienen in: Journal of Business Ethics | Ausgabe 2/2020

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Abstract

This paper examines the relationship between loan guarantees and audit fees as well as the moderating effect of corporate social responsibility (CSR). We find that guaranteeing another entity’s debt significantly increases firms’ own audit fees. However, the disclosure of CSR information attenuates the fee-increasing effects of loan guarantees. A closer examination reveals that the role of CSR is attributable to the information effect rather than the signal effect. Our results are robust to the use of a quasi-natural experiment, a propensity score matching analysis, a Heckman two-stage treatment effect model and alternative proxies. This work makes new contributions to the current understanding of the consequences of loan guarantees, determinants of audit fees and value of CSR disclosure.

Vorheriger Artikel Historicizing Modern Slavery: Free-Grown Sugar as an Ethics-Driven Market Category in Nineteenth-Century Britain

Nächster Artikel Too Much of a Good Thing? On the Relationship Between CSR and Employee Work Addiction

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At the end of 2016, 3052 firms were listed on the Chinese stock market while the number of enterprises in China amounted to approximately 14.62 million (China Statistical Yearbook, 2017). See http://www.csrc.gov.cn/pub/zjhpublic/G00306204/zqscyb/201703/t20170308_313308.htm and http://www.stats.gov.cn/tjsj/ndsj/2017/indexch.htm.

For example, the Chinese Company Law, the CSR principles and the guidelines for CSR disclosure issued by the Shanghai and Shenzhen Stock Exchanges encourage companies to operate in accordance with social morals and business ethics, and to release CSR information in annual or standalone reports.

To rule out the alternative explanation that it is related party transactions rather than the loan guarantee per se that lead to higher audit fees, we control this compounding effect in the regression model. The firm-specific measure of related party transaction (RPT) is defined as the total amount of all transactions with guarantees or pledges excluded, scaled by total assets (Al-Dhamari et al. 2018; Fang et al. 2018). Untabulated results show that the coefficient of the additional variate RPT is positive but not significant, while both the magnitude and significance of Totalgua are similar to those of the main test, supporting our predictions about the effect of loan guarantee activity on audit fees.

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Titel: Loan Guarantees, Corporate Social Responsibility Disclosure and Audit Fees: Evidence from China
verfasst von: Fangjun Wang
Luying Xu
Fei Guo
Junrui Zhang
Publikationsdatum: 04.03.2019
Verlag: Springer Netherlands
Erschienen in: Journal of Business Ethics / Ausgabe 2/2020
Print ISSN: 0167-4544
Elektronische ISSN: 1573-0697
DOI: https://doi.org/10.1007/s10551-019-04135-6

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