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Institutional investors, stewardship code disclosures and audit fees

James Routledge (Accounting, Hitotsubashi University, Tokyo, Japan)

Asian Review of Accounting

ISSN: 1321-7348

Article publication date: 1 December 2020

Issue publication date: 20 January 2021




This study uses content analysis of disclosures under the Japanese Stewardship Code to examine how investee company audit fees are influenced by institutional investor governance.


Scores are developed based on objective and verifiable Code disclosures made by the top-five institutional investors of Nikkei 225 index companies. The scores are related to management of conflicts of interest, monitoring actions and resource availability connected with stewardship.


The results show that higher scores on monitoring and resource availability are associated with lower audit fees. The extent of resources that institutional investors allocate to playing an effective stewardship role is found to be the primary determinant of their influence on audit fees. Overall, the findings are consistent with governance by institutional investors reducing audit risk and audit effort, which leads to lower audit fees.


The study offers new insights because there is no apparent prior research that uses Code disclosure content to measure institutional investor governance. This provides new information on the open question of the relation between audit fees and institutional investor governance.



The author acknowledges the thoughtful input of the anonymous referee and helpful comments of the editor Professor Nan Zhou, Hiro Fukukawa and John Goodwin. The research assistance provided by Tenger Ganbold, Yuki Horie and Kiyonori Iwata is also acknowledged. Funding: The study was supported by Ministry of Education, Culture, Sports, Science and Technology, Japan Society for the Promotion of Science, Grant 17K04041.


Routledge, J. (2021), "Institutional investors, stewardship code disclosures and audit fees", Asian Review of Accounting, Vol. 29 No. 1, pp. 61-78.



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