Hometown sentiment: CEO hometown identity and company audit fees

Purpose The purpose of this study is to examine the impact of chief executive officer (CEO) hometown identity on company audit fees in the Chinese setting. Design/methodology/approach This study uses data from Chinese public companies in the Shanghai Stock Exchange and the Shenzhen Stock Exchange for the period 2008–2019. This study investigates the impact path of CEO hometown identity on company audit fees and further examines the moderating role of internal and external governance level. Findings This study finds that CEO hometown identity is significantly and negatively related to company audit fees. In addition, CEO hometown identity can reduce audit fees by alleviating agency risk and litigation risk. Moreover, the negative effect of CEO hometown identity on audit fees is more pronounced in companies with a higher percentage of institutional investors shareholding and more analysts tracking quantity. Practical implications This study may provide new references for executives’ selection, auditors’ optimization decisions and regulators’ information disclosure system. Originality/value This study contributes to the literature by exploring the effect of CEO hometown identity on audit fees in the context of China.