ABSTRACT
In this study, we examine the influence of the Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information (MMoU), a special cooperative arrangement designed to enhance cross-border regulatory enforcement, on the audit fees imposed on U.S.-listed foreign firms. Using the different times of countries’ entry into the MMoU as a staggered shock, we find that after a foreign country enters the MMoU, the audit fees for its U.S.-listed firms increase to a greater extent than those for either foreign firms or U.S. domestic firms. This effect is stronger for U.S.-listed foreign firms from countries with weaker institutions and for auditors with a higher level of firm-specific litigation concern, as measured by firms’ auditing by Big 4 auditors.
