Observational study reveals higher audit fees for auditors from elite universities in China, indicating that educational prestige serves as a valuable signal in audit pricing.
Audit pricing remains a black box due to the opaque fee negotiations and the credence nature of audit services. Focusing on auditors’ elite educational backgrounds as a salient human capital signal, this study investigates the economic returns to educational prestige in China’s audit market. The results show that auditors with elite university degrees are associated with higher audit fees. The association attenuates substantially after controlling client fixed effects, indicating that part of the baseline premium reflects auditor-client matching. The association is amplified in less concentrated markets and among non-Big 4 firms. This premium is stronger in state-owned enterprises and intensifies following the 2013 special general partnership reform. This study extends signalling theory by delineating the organizational, market, and institutional boundaries that govern the human capital valuation in emerging audit market.
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Guo et al. (2026) studied this question.
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