Executive equity risk-taking incentives and audit pricing

Chen, Yangyang, Gul, Ferdinand A., Veeraraghavan, Madhu and Zolotoy, Leon 2015, Executive equity risk-taking incentives and audit pricing, Accounting review, vol. 90, no. 6, pp. 2205-2234, doi: 10.2308/accr-51046.

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Title Executive equity risk-taking incentives and audit pricing
Author(s) Chen, Yangyang
Gul, Ferdinand A.ORCID iD for Gul, Ferdinand A. orcid.org/0000-0001-8260-1472
Veeraraghavan, Madhu
Zolotoy, Leon
Journal name Accounting review
Volume number 90
Issue number 6
Start page 2205
End page 2234
Total pages 30
Publisher American Accounting Association
Place of publication Sarasota, Flo.
Publication date 2015-11
ISSN 0001-4826
Keyword(s) Social Sciences
Business, Finance
Business & Economics
executive compensation
audit fees
vega
misreporting
SOX
CLIENT-ACCEPTANCE DECISIONS
EARNINGS MANAGEMENT
LITIGATION RISK
STOCK-OPTIONS
CORPORATE GOVERNANCE
CLAWBACK PROVISIONS
FIRM PERFORMANCE
BUSINESS RISK
FEES
QUALITY
Summary Using a large sample of U.S. firms spanning the period 2000-2010, we document a strong positive association between the sensitivity of CEO compensation portfolio to stock return volatility (vega) and audit fees. We also show that the positive association between vega and audit fees is weaker in the post-Sarbanes-Oxley Act (SOX) period. In supplementary tests, we show that the relation between vega and audit fees is stronger for firms with older CEOs and in firms where the CEO is also chairman of the board. Collectively, our results suggest that audit firms incorporate executive risktaking incentives in the fees they charge for their services.
Language eng
DOI 10.2308/accr-51046
Field of Research 150102 Auditing and Accountability
Socio Economic Objective 970115 Expanding Knowledge in Commerce, Management, Tourism and Services
HERDC Research category C1.1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Copyright notice ©2015, American Accounting Association
Persistent URL http://hdl.handle.net/10536/DRO/DU:30081738

Document type: Journal Article
Collections: Department of Accounting
2018 ERA Submission
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