Independent director reputation incentives, accruals quality and audit fees
Document Type
Article
Publication Date
7-1-2020
Abstract
While prior research provides abundant evidence that independent directors are associated with favorable outcomes, researchers have only recently started to investigate the impact of independent director reputation incentives. This study examines whether the reputation incentives of independent directors are associated with accruals quality and audit fees. The results reveal a negative relationship between the proportion of independent directors with relatively low reputation incentives and accruals quality. Further, the proportion of independent directors with relatively low reputation incentives is positively associated with audit fees, suggesting that auditors view lower reputation incentives as increasing risk. We also find that Big 4/5 auditor office size moderates the relationship between independent director reputation incentives and audit fees. Specifically, our results indicate that audit fees increase less in response to lower reputation incentives as office size increases, suggesting that larger offices respond to the risks associated with lower reputation incentives more efficiently than smaller offices.
Publication Title
Journal of Business Finance and Accounting
Volume
47
Issue
7-8
First Page
982
Last Page
1011
Digital Object Identifier (DOI)
10.1111/jbfa.12435
ISSN
0306686X
E-ISSN
14685957
Citation Information
Bryan, D.B., Mason, T.W. (2020) Independent director reputation incentives, accruals quality and audit fees. Journal of Business Finance and Accounting, 47(7-8), 982-1011.