Yi Duo

PhD Candidate in Accounting
Sauder School of Business
University of British Columbia



Academic Building A 242
Binghamton University
School of Management
4400 Vestal Parkway East
Binghamton, NY 13902


Research Interests:

Corporate political connections, audit assurance, financial reporting, corporate governance, political economy

Working Papers:

1. Audit fees of politically connected firms (Job Market Paper)
  
        Do politically connected firms pay higher or lower audit fees, and why? This paper seeks to answer this question. On the one hand, politically connected firms are believed to have lower accounting quality and face higher political risk, hence higher audit fees. On the other hand, with lower investor litigation and bankruptcy risks, one would expect audit fees to be lower for firms with political connections. In this paper, using a hand-collected data set between 2004 and 2013 of politically connected boards in the S&P 500 Index, I find that politically connected firms pay higher audit fees. The effect is stronger for politicians with executive branch experiences. Through cross-sectional comparison and difference-in-difference approach, hypotheses that such an audit fee gap comes from lower accounting quality or higher political risk are rejected. Path analysis reveals that this audit fee difference is most likely due to higher compliance demands and additional audit requirements for government contractors, who are more likely to be politically connected. This paper demonstrates a situation where auditors need to perform beyond the US GAAP requirements and casts doubt on the cynical notion that corporate political connections signal nefarious motives.

2. Politically connected firms, government procurements, and corporate taxes

        This paper explores the effects of politically connected boards on the allocation of government procurements and on the collection of corporate taxes in the United States. Government procurements and corporate taxes are both direct channels for corporate political connections to generate values to firms and their shareholders. A decade-long (2004-2013) data set with detail information of politically connected board members from the S&P 500 firms is gathered. First, I demonstrate that firms indeed seek different characters in politically connected board members according to their varying needs. Firms that rely on government procurements as an important revenue source are more likely to target politicians with executive branch experiences; whereas those under tight regulations are more inclined to have politicians with legislative branch experiences. Next, using multiple elections available in my sample period, I find that when the control of the White House change hands, firms connected to the winning political party gains more government procurements subsequently. However, the lowering effect can be found for corporate taxes in neither presidential nor midterm elections. Moreover, accounting performances are examined, and it does not seem like politically connected firms are particularly different from their non-connected counterparts.