Management Entrenchment, Agency Problem and Audit Fees

  • Xinhua Wang International Business Faculty Beijing Normal University, Zhuhai Campus Zhuhai, P.R.China
  • Bibo Yang Graduate School of Business The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong SAR


This study examines the association between audit fees and management entrenchment, which is proxied by Bebchuk et al. (2005) entrenchment index. The results show that audit fees are significantly positively correlated with Bebchuk et al. (2005) entrenchment index controlling for other factors. Further results show that the positive relation between audit fees and the entrenchment index exists only in firm with low growth opportunity and high free cash flow (i.e. firms with severe Jensen agency problem). These results indicate that firms’ agency problems moderate the association between audit fees and management entrenchment.

Research Articles