2 The Effects of Board Independence and Auditors ’ Audit and Non-Audit Fees on IPO Value

This paper examines the effect of board independence and fees paid to audit firms on the value of 375 UK IPOs. It controls for the simultaneous determination of audit and non-audit fees and shows that both fees positively affect IPO value. The effect of both fees is significantly higher in firms with more independent boards. Hence, internal governance mechanisms may complement services provided by auditors in terms of generating higher valuations. We also find evidence of the positive moderating effects of venture capitalists. Overall, our results suggest that audit and non-audit fees are likely to be driven by filing requirements rather than client-specific rents suggesting the auditors’ independence when determining cost of their audit and non-audit services to IPO firms