Environmental Policy and Audit Pricing

50 Pages Posted: 18 Mar 2020

See all articles by Monika K. Rabarison

Monika K. Rabarison

University of Texas Rio Grande Valley (UTRGV) (Formerly University of Texas-Pan American)

Ibrahim Siraj

Long Island University-Post

Bin Wang

Marquette University - College of Business Administration

Date Written: January 16, 2020

Abstract

This paper examines the effect of environmental policy stringency on audit pricing. Exploiting the exogenous variation in environmental policies across 26 countries, we find that firms in countries with more stringent environmental policies incur lower audit fees. The inverse association is more pronounced in common law countries, in countries with a higher level of public enforcement of regulations, and in countries with more protection of investors. The lower audit fees are also more prominent for firms followed by more analysts and firms with larger institutional ownership. Furthermore, we find that firms in countries with strong regulations are better and more innovative at managing environmental risk, which implies that better environmental performance of the firms following stronger regulations could lower the business risks and thus, decrease audit fees. Overall, our findings suggest that compliant firms benefit from environmental policy stringency.

Keywords: Environmental Policy Stringency; Government Policy and Regulation; Environmental Risk; Audit Pricing

JEL Classification: K32; Q56; G38; M42

Suggested Citation

Rabarison, Monika and Siraj, Ibrahim and Wang, Bin, Environmental Policy and Audit Pricing (January 16, 2020). Available at SSRN: https://ssrn.com/abstract=3542562 or http://dx.doi.org/10.2139/ssrn.3542562

Monika Rabarison

University of Texas Rio Grande Valley (UTRGV) (Formerly University of Texas-Pan American) ( email )

1201 W. University Dr.
Edinburg, TX 78539
United States

Ibrahim Siraj

Long Island University-Post ( email )

United States

Bin Wang (Contact Author)

Marquette University - College of Business Administration ( email )

P.O. Box 1881
Milwaukee, WI 53201-1881
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
25
Abstract Views
160
PlumX Metrics