Mutual fund herding and audit pricing
This study investigates how investor trading behavior affects audit pricing by examining mutual fund herding in specific. When mutual fund managers herd due to information cascade, mimicking incentive, or agency problem, it causes information friction and weakens their monitoring effectiveness. Heig...
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sg-ntu-dr.10356-1723132023-12-06T00:50:40Z Mutual fund herding and audit pricing Ge, Yao Hung, Shengmin Huang, Wei Qiao, Zheng Deng, Xin Nanyang Business School Business::Auditing Mutual Fund Herding This study investigates how investor trading behavior affects audit pricing by examining mutual fund herding in specific. When mutual fund managers herd due to information cascade, mimicking incentive, or agency problem, it causes information friction and weakens their monitoring effectiveness. Heightened governance risk is associated with higher audit risk and thus higher audit pricing. In our empirical tests, we find that herding weakens mutual funds’ information advantage and monitoring effectiveness, ultimately resulting in higher audit fees. To mitigate the endogeneity concern, we employ the natural experiment of the 2004 SEC regulation change on mutual fund disclosure frequency to capture exogenous change in herding intensity. Our findings are robust using propensity score matching method and alternative measures. Consistent with our conjecture, we document that firms facing stronger mutual fund herding are associated with deteriorated corporate disclosure quality. Shengmin Hung acknowledges the support from the Ministry of Science and Technology of Taiwan (MOST 108-2628-H-031-001-MY3). Zheng Qiao acknowledges the support from the National Natural Science Foundation of China (71802171). 2023-12-06T00:50:40Z 2023-12-06T00:50:40Z 2023 Journal Article Ge, Y., Hung, S., Huang, W., Qiao, Z. & Deng, X. (2023). Mutual fund herding and audit pricing. Research in International Business and Finance, 64, 101904-. https://dx.doi.org/10.1016/j.ribaf.2023.101904 0275-5319 https://hdl.handle.net/10356/172313 10.1016/j.ribaf.2023.101904 2-s2.0-85150076229 64 101904 en Research in International Business and Finance © 2023 Elsevier B.V. All rights reserved. |
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Business::Auditing Mutual Fund Herding Ge, Yao Hung, Shengmin Huang, Wei Qiao, Zheng Deng, Xin Mutual fund herding and audit pricing |
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This study investigates how investor trading behavior affects audit pricing by examining mutual fund herding in specific. When mutual fund managers herd due to information cascade, mimicking incentive, or agency problem, it causes information friction and weakens their monitoring effectiveness. Heightened governance risk is associated with higher audit risk and thus higher audit pricing. In our empirical tests, we find that herding weakens mutual funds’ information advantage and monitoring effectiveness, ultimately resulting in higher audit fees. To mitigate the endogeneity concern, we employ the natural experiment of the 2004 SEC regulation change on mutual fund disclosure frequency to capture exogenous change in herding intensity. Our findings are robust using propensity score matching method and alternative measures. Consistent with our conjecture, we document that firms facing stronger mutual fund herding are associated with deteriorated corporate disclosure quality. |
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Nanyang Business School |
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Nanyang Business School Ge, Yao Hung, Shengmin Huang, Wei Qiao, Zheng Deng, Xin |
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Article |
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Ge, Yao Hung, Shengmin Huang, Wei Qiao, Zheng Deng, Xin |
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Ge, Yao |
title |
Mutual fund herding and audit pricing |
title_short |
Mutual fund herding and audit pricing |
title_full |
Mutual fund herding and audit pricing |
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Mutual fund herding and audit pricing |
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Mutual fund herding and audit pricing |
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mutual fund herding and audit pricing |
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2023 |
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https://hdl.handle.net/10356/172313 |
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1784855596223168512 |