Abstract:
International expansion helps firms overcome domestic bottlenecks and enhance competitiveness, yet it may also heighten the complexity of the operating environment, drive up management costs, and even impair internal corporate governance. Using a sample of A-share firms listed on the Shanghai and Shenzhen stock exchanges, this paper finds that international expansion has a significantly positive effect on firms' operating performance, raising both return on equity and revenue growth, yet it also increases firms' abnormal audit fees. Two mechanisms are at work: on the one hand, the wider geographic scope of operations and the greater diversification of business structure jointly raise business complexity; on the other hand, the intensified information asymmetry within firms creates conditions for managers to engage in unproductive rent-seeking. The latter effect is more pronounced and warrants attention. In addition, the increase in abnormal audit fees induced by international expansion is often accompanied by a decline in audit quality and operating performance. The study recommends: first, abnormal audit fees should be incorporated into the audit quality inspection indicator system. Firms whose audit fees deviate significantly from the industry norm for three consecutive years should be designated as key regulatory targets, and industry analysis reports on abnormal audit fees should be regularly published to foster a market-wide monitoring atmosphere. Second, multinational enterprises should be guided to add monitoring indicators for audit fees in their internal control processes and establish internal tracing mechanisms for abnormal audit fees, thereby curbing audit collusion at its source. Third, analysts should be encouraged to continuously track and disclose risks of firms with abnormal audit fees, thereby forming market-based constraints on abnormal audit fees. This study offers a new perspective on the causes of abnormal audit fees and provides practical guidance for audit governance in internationalization.
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