The impact of audit fees on the financial performance of high-technology companies: Evidence from China

This study investigates the impact of audit fees on the financial performance of high-technology companies in state-owned enterprises and privately owned enterprises in China’s manufacturing industry. Mixed results are found in literature. In view of the research gap, samples from 2015 to 2024 from the China Stock Market and Accounting Research (CSMAR) database are used to analyze the data with 2,238 samples. Fixed-effects regression models indicate that audit fees negatively impact financial performance. The robustness test and sensitivity analysis of separate samples of state-owned enterprises and privately owned enterprises show that the results are robust. According to agency theory, higher audit fees reflect a company’s weak internal controls and management engaging in highrisk activities of agency problems, such as information asymmetry, rather than improving audit quality. According to the results of this study, financial performance is affected by the negative signal from increased audit fees, which affects investors’ motivation in the stock market. This study highlights the importance of evaluating audit fee rationalization for firms and improving corporate governance to ensure that audit fees are consistent with audit quality and shareholder interests.