The explained variable in Model 1 is Lnfee, which is defined as the natural logarithm of the current year’s
external audit fees. The explanatory variable is Gov, which represents corporate governance. Previous studies
have adopted two types of variables to proxy for corporate governance: one or more aspects or characteristics
of corporate governance and a variable encompassing the comprehensive aspects of such governance. For
example, Larcker and Richardson (2004) use the structure of the board of directors, Carcello et al. (2002)
the characteristics of the board of directors and Liu and Hu (2006) the type of final controller, ownership concentration,
board independence, CEO duality and managerial shareholdings. All of these proxies are examples
of the first type of variable. Studies using proxies of the second type are primarily concerned with the effectiveness
of corporate governance, e.g., Beiner et al. (2003) and Drobetz et al. (2004). Pan (2008) is the only
study of the relationship between audit fees and corporate governance to use the corporate governance index
The explained variable in Model 1 is Lnfee, which is defined as the natural logarithm of the current year’s
external audit fees. The explanatory variable is Gov, which represents corporate governance. Previous studies
have adopted two types of variables to proxy for corporate governance: one or more aspects or characteristics
of corporate governance and a variable encompassing the comprehensive aspects of such governance. For
example, Larcker and Richardson (2004) use the structure of the board of directors, Carcello et al. (2002)
the characteristics of the board of directors and Liu and Hu (2006) the type of final controller, ownership concentration,
board independence, CEO duality and managerial shareholdings. All of these proxies are examples
of the first type of variable. Studies using proxies of the second type are primarily concerned with the effectiveness
of corporate governance, e.g., Beiner et al. (2003) and Drobetz et al. (2004). Pan (2008) is the only
study of the relationship between audit fees and corporate governance to use the corporate governance index
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