The Shanghai Stock Exchange (SSE) introduced the SSE Corporate Governance Sector in 2007, thus offering
a good opportunity for a comprehensive investigation of the relationship between corporate governance
and audit fees. The listed companies within this sector are subject to greater public scrutiny of their corporate
governance structures. After preliminary examination of listed companies’ application qualifications, the
appraisal working group of the Corporate Governance Sector publishes the application materials of those that
qualify on its official website for public appraisal. The overall aim is to involve public investors in the appraisal
process and encourage all market participants to pay greater attention to the issue of corporate governance.
The SSE also invites professional research institutions to appraise the SSE Corporate Governance Sector and
to judge the governance structures of the companies submitting applications. These research institutions
include CITIC Securities Co., Ltd., Guotai Junan Securities Co., Ltd., Shenyin & Wanguo Securities Co.,
Ltd. and Haitong Securities Co., Ltd., among others. Experts and scholars have also been invited to form
an Expert Consultative Committee for Appraisal of the Corporate Governance Sector, which meets regularly
to discuss the method, process and results of the appraisal process, thus ensuring its objectivity and standardization.
This rigorous appraisal process ensures that listed companies undergo comprehensive assessment of
their corporate governance level prior to inclusion in the SSE Corporate Governance Sector. As noted, it also
makes possible a comprehensive investigation of the relationship between corporate governance and audit
fees.