Does option trading affect audit pricing?
Using a variety of methods to address potential endogeneity issues, research suggests that option trading significantly affects audit fees in a negative way.
Presented by
Description
Results show that higher option trading results in less auditor effort and lower probability of lawsuits and misstatements. The impact of option trading on audit fees is stronger when the auditor is located further away from the audited firm, for firms with non-specialized auditors, for auditors with early years of audit tenure, and for firms with higher information asymmetry problems, poorer earnings and governance quality. Overall, findings from this study underscore the significance of option trading in improving a firm’s information environment, thereby reducing the fees charged by auditors.
Speaker Bios
Professor Bala Balachandran joined La Trobe University in February 2009. Prior to this he worked at Monash University, the Victoria University of Wellington, and the University of Jaffna. He received his Master of Social Science and PhD in Finance from the University of Birmingham. Bala has published research papers in high quality finance journals, including Journal of Financial Economics, Journal of Financial and Quantitative Analysis, Journal of Corporate Finance, and Journal of Financial Markets. Bala has led many successful research grant applications. Most notably, he secured funding of more than $600k from Australian Research Council. Bala’s insights into the empirical applications of corporate finance is evidenced by the media interest in his work as well as his expert opinion in the Supreme Court proceedings.
Bala initiated and organized an international conference on Finance and Corporate Governance for La Trobe University in 2010 to bring academics, practitioners and students together. The resounding success of the first Conference paved the way for the next 8 conferences. Bala received an award in appreciation of “outstanding initiative and work in bringing the FMCG conference into being and success” at the 4th Financial Markets and Corporate Governance conference held in Wellington, NZ in 2013. Since 2014, Bala is serving as a guest editor for the Pacific Basin Finance Journal.