The aforementioned research tests the relationship between corporate governance and audit fees empirically
from different perspectives, although the theoretical basis of most is substitution theory, with signaling
theory receiving little attention to date. Most of this research also considers corporate governance characteristics
such as shareholdings, board of director and management variables as proxies for corporate governance
(Pan, 2008). As noted in the introduction, there are several limitations to the use of such proxies. To address
these limitations, this paper analyzes the relationship between corporate governance and audit fees from the
perspectives of substitution theory and signaling theory, and uses inclusion in the SSE Corporate Governance
Sector to proxy for corporate governance.
The aforementioned research tests the relationship between corporate governance and audit fees empirically
from different perspectives, although the theoretical basis of most is substitution theory, with signaling
theory receiving little attention to date. Most of this research also considers corporate governance characteristics
such as shareholdings, board of director and management variables as proxies for corporate governance
(Pan, 2008). As noted in the introduction, there are several limitations to the use of such proxies. To address
these limitations, this paper analyzes the relationship between corporate governance and audit fees from the
perspectives of substitution theory and signaling theory, and uses inclusion in the SSE Corporate Governance
Sector to proxy for corporate governance.
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