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Bankruptcy reform and audit fees: Evidence from quasi-natural experiment in India

Author

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  • Basu, Soumyabrata
  • Bhagawan, Praveen
  • Mukhopadhyay, Jyoti Prasad

Abstract

Considering the enactment of the Insolvency and Bankruptcy Code (IBC) in India, we causally assess its impact on Indian firms’ audit fees. Using the difference-in-differences (DiD) technique, we find that financially distressed firms pay lesser audit fees than financially non-distressed firms in India post-bankruptcy reforms. The robustness of our findings is ensured using matching combined with DiD and randomization inference tests. Moreover, we find that IBC has significantly reduced audit fees for distressed firms of smaller size. This decline in audit fees due to the introduction of bankruptcy codes suggests that the benefits of such regulation outweigh its associated costs.

Suggested Citation

  • Basu, Soumyabrata & Bhagawan, Praveen & Mukhopadhyay, Jyoti Prasad, 2025. "Bankruptcy reform and audit fees: Evidence from quasi-natural experiment in India," Finance Research Letters, Elsevier, vol. 81(C).
    • Handle: RePEc:eee:finlet:v:81:y:2025:i:c:s1544612325007718
    DOI: 10.1016/j.frl.2025.107512
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    Keywords

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    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing

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