Title

Independent director reputation incentives, accruals quality and audit fees

Document Type

Article

Publication Date

7-1-2020

Subject Area

ARRAY(0x55e57b2d3570)

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

Share

COinS