臺大管理論叢 NTU Management Review VOL.30 NO.2

229 NTU Management Review Vol. 30 No. 2 Aug. 2020 Variable Definition CONTROL VARIABLES LOCAL = Coded 1 if a firm engages an audit firm that is neither an international Big-4 nor a local Top 10 audit firm and 0 otherwise. CMI = The credit market index, derived by Wang et al. (2008). GDI = The government decentralization index, derived by Wang et al. (2008). LEI = The legal environment index, derived by Wang et al. (2008). ISSUEB = Coded 1 if the client issues B shares and 0 otherwise. ISSUEH = Coded 1 if the client issues H shares and 0 otherwise. EXCHANGE = Coded 1 if the firm is listed in the Shanghai Stock Exchange and 0 otherwise. 3.2.2 Effect on Audit Fees To analyze the joint effect of the reasons for auditor-client realignment and of the government initiative to expand and strengthen Chinese accounting firm practices on audit fees, we follow Huang et al. (2015) and develop the following regression model: LNAF = β 0 + β 1 REASON_CLIENT + β 2 REASON_CPA + β 3 REASON_GOV + β 4 POST_2007 + β 5 REASON_CLIENT × POST_2007 + β 6 REASON_CPA × POST_2007 + β 7 REASON_GOV × POST_2007 + β 8 LNTA + β 9 RECTA + β 10 INVTA + β 11 LIQ + β 12 DA + β 13 ROA + β 14 ADJRETURN + β 15 STDRET + β 16 CIFIRM + β 17 CICPA + β 18 EXPFIRM + β 19 EXPCPA + β 20 LEGALFORMLLP + β 21 LEGALFORMLLC + β 22 TOP10 + β 23 LOCAL + β 24 MAO + β 25 STATE + β 26 CMI + β 27 GDI + β 28 LEI +β 29 ISSUEB + β 30 ISSUEH + EXCHANGE + INDUSTRY + ε . (2) As demonstrated in Model (2) above, the dependent variable is LNAF. The independent variable, auditor-client realignment reasons, is divided into three categories. REASON_CLIENT is coded “1” if the auditor changes are driven by audit clients and “0” otherwise. Likewise, REASON_CPA is coded “1” if the auditor changes are driven by the predecessor auditors and “0” otherwise. Similarly, REASON_GOV is coded “1” if the auditor changes are driven by the government and “0” otherwise. For the purpose of the analyses, we include three intersection variables, REASON_CLIENT × POST_2007 , REASON_CPA × POST_2007 , and REASON_GOV × POST_2007 , to investigate the joint effect of the reasons for auditor-client realignment and the initiative issued by CICPA with