Business, Management and Accounting
8 years ago

High audit fees lead firms to favor debt over equity financing.

SSRN Electronic Journal
Audit Fees and Capital Structure Decision
Bhatia Anmol, Muhammad Jahangir Ali, Balasingham Balachandran, Doureige J. Jurdi

Paper Summary

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The study looked at how audit fees affect a company's decision on how to finance itself. They found that companies with higher audit fees tend to have more debt. This means that companies paying more for audits are more likely to borrow money instead of selling shares. This suggests that the cost of audits can influence how a company chooses to raise funds.