Academic Activities
[Research]Managerial Stock Ownership, Analyst Coverage, and Audit Fee
2012.07.01 Views 665 경영학연구분석센터
Journal of Accounting, Auditing & Finance
Volume 27, Issue 3, Jul 2012, pp 412-437
Giorgio Gotti 1, Sam Han 2, Julia L. Higgs 3, Tony Kang 4
1 University of Texas at El Paso, USA
2 Korea University, Seoul, South Korea
3 Florida Atlantic University, Boca Raton, USA
4 Oklahoma State University, Stillwater, USA
http://journals.sagepub.com/doi/abs/10.1177/0148558X11409158
Abstract
The authors study whether managerial ownership and analyst coverage relate to audit fees. To the extent that these corporate governance factors relate to auditor assessment of the firm’s agency costs and hence various risks the auditor must consider in the development of an audit program, they will affect audit effort and hence audit fees. The authors find that managerial equity holdings and analyst coverage are negatively associated with audit fees and that these associations are both statistically and economically significant. On average, a 1% increase in managerial ownership translates into a 0.2% reduction in audit fees. In the low managerial ownership sample (i.e., less than 5% managerial ownership), a 1% increase in the ownership reduces the fees by 1.4%. Similarly, one more analyst following a company reduces audit fees by 9.3%. These results add to the literature on the effects of corporate governance on audit fees.
Volume 27, Issue 3, Jul 2012, pp 412-437
Giorgio Gotti 1, Sam Han 2, Julia L. Higgs 3, Tony Kang 4
1 University of Texas at El Paso, USA
2 Korea University, Seoul, South Korea
3 Florida Atlantic University, Boca Raton, USA
4 Oklahoma State University, Stillwater, USA
http://journals.sagepub.com/doi/abs/10.1177/0148558X11409158
Abstract
The authors study whether managerial ownership and analyst coverage relate to audit fees. To the extent that these corporate governance factors relate to auditor assessment of the firm’s agency costs and hence various risks the auditor must consider in the development of an audit program, they will affect audit effort and hence audit fees. The authors find that managerial equity holdings and analyst coverage are negatively associated with audit fees and that these associations are both statistically and economically significant. On average, a 1% increase in managerial ownership translates into a 0.2% reduction in audit fees. In the low managerial ownership sample (i.e., less than 5% managerial ownership), a 1% increase in the ownership reduces the fees by 1.4%. Similarly, one more analyst following a company reduces audit fees by 9.3%. These results add to the literature on the effects of corporate governance on audit fees.