Asymmetric Reactions of Abnormal Audit Fees Jump to Credit Rating Changes

Considering the inherent stickiness of abnormal audit fees, our study contributes to literature by decomposing fees into a jump component and long-run sticky component. We investigate whether how changes in credit ratings asymmetrically affect fees. document positive association between rating downgrades find that heightened bankruptcy risk misstatement are mechanisms drive this relationship. Further analysis shows firms experiencing more likely receive going concern opinion experience longer report lags. Taken together, findings provide direct evidence significantly associated with particularly Given serial correlation sheds light on importance disaggregation fee residuals components.