CEO Domination, Growth Opportunities, and their Impact on Audit Fees

By J. Tsui, B. Jaggi, Ferdinand A. Gul. 2001

257 citations recorded by the source corpus.

This study examines the relationship between a firm's internal monitoring mechanism and its impact on the audit fee. The first hypothesis investigates whether firms with independent corporate boards (chief executive officer and chairman being separate individuals) provide a more effective internal monitoring mechanism and are thus associated with lower control risk, resulting in lower audit effort and fees as compared to nonindependent, CEO-dominated boards. The second hypothesis examines whether the effectiveness of the internal monitoring mechanism provided by independent corporate boards is independent of the firms' growth opportunities. High-growth firms are by nature more difficult to monitor due to the existence of discretionary investments and measurement problems associated with future assets. Thus, the negative association between independent corporate boards and audit fees is expected to be affected by a firm's growth. Results using 650 observations from Hong Kong companies provide support for both hypotheses.

Subfields: Accounting, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/74acb60ca163e1c4879a3198935cdcc8cfab3a3c

How researchers see this paper

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In Accounting

1. J. Sarkar
2. M. Zaman
3. R. Haniffa
4. Mohammed Hudaib
5. K. Sen
6. Subrata Sarkar
7. Salim Darmadi
8. M. Muttakin

In Strategy and Management

1. M. Zaman
2. R. Haniffa
3. M. Muttakin
4. Arifur Khan
5. Yasemin Karaibrahimoglu

Citations in the corpus

• Corporate Governance Quality, Audit Fees and Non-Audit Services Fees (2011, background): “may increase AF as it requires higher control of risk and higher audit effort (Tsui et al., 2001).”
• Do Auditors Price Audit Committee's Expertise? The Case of Accounting Vs. Non-Accounting Financial Experts (2009, unknown): “We contribute to the literature on audit pricing of control risk, particularly the risk of corporate governance and our findings are consistent with the risk-based perspective espoused by Tsui et al. (2001) and Bedard and Johnstone (2004) that auditors price the risk of corporate governance and effe”
• Board of Directors and Opportunistic Earnings Management: Evidence from India (2008, background): “Tsui, Jaggi and Gul (2001) investigate the relation between CEO duality, audit fees and growth opportunities.”