题 目:Is Audit Committees’ Equity Compensation Related to Audit Fees?
报告人:刘馨茗 助理教授
主持人:张国清 教授
时 间:2019年11月26日(星期二),15:00-17:30
地 点:嘉庚二208室
论文摘要
Section 301 of SOX implicitly assumes that audit committees can independently determine audit fees.Critics of Section 301 have questioned this assumption in particular and the efficacy of Section 301 more generally. In response, the SEC issued a concept release in 2015 calling for public disclosure of the process audit committees follow for determining auditor compensation. Motivated by these calls and the widespread use of stocks and options to compensate firms’ independent directors, we examine the relation between equity compensation granted to audit committee members and audit fees. Using a sample of 3,685 firm-year observations during 2007-2015, we find a negative relation between audit committee equity compensation and audit fees, consistent with our prediction that larger equity pay induces audit committee members to compromise independence by paying lower audit fees. These findings are robust to controlling for endogeneity, relative power of the CFO and the audit committee chair, firm size effect, alternative measures of equity compensation, and alternative samples. We further show that larger equity compensation is associated with lower earnings quality. We also find that the negative effect of equity compensation on audit fees is stronger when city-level audit market competition is high and leads to even lower audit fees. However, this negative relation disappears when (1) firms face high litigation risk, (2) auditors have stronger bargaining power, (3) the audit committee comprises a high proportion of accounting experts, and (4) the auditors are industry experts. Our empirical results bear important implications for regulators and investors.