Capital Market Opening and Audit Fees: Based on the Quasi-Natural Experiment of the Shanghai (Shenzhen) -Hong Kong Stock Connect
Zhang (Family name) Juan

Abstract
This paper takes the implementation of Shanghai (Shenzhen)-Hong Kong Stock Connect policy as a quasi-natural experiment, on this basis establishes a multi-stage DID model, and empirically analyzes the impact of capital market opening policy on audit fees. The study found that the Shanghai (Shenzhen) -Hong Kong Stock Connect policy has increased the audit fees. In addition, this paper finds that after the implementation of the Shanghai (Shenzhen) and Hong Kong Stock Connect policy, the change of the agency cost and change to the international "Big 4" audit are two important mechanisms for the increase of audit fees. Due to the differences in agency cost, enterprises with high agency cost have higher audit fees. When the firm changed to the international "Big 4" audit firms, the audit fees did not increase due to the policy, and audit fees of not changing firms increased significantly. The conclusion of this paper shows that the opening of capital market has an important influence on the information environment of China's capital market and provides policy inspiration for the further opening of China's capital market.

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