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Industry tournament incentives and audit fees

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  • Yiqing Tan

Abstract

I examine whether industry tournament incentives of CEOs are associated with audit fees. I find that industry tournament incentives, measured by the compensation gap between a CEO under consideration and the second‐highest‐paid CEO among similar industries, reduce audit fees. Also, this effect is more pronounced for firms with a high level of mobility and managerial ability. To establish causality, I employ a difference‐in‐differences approach to compare the change in audit fees before and after the implementation of FAS 123R. My finding holds after I account for potential endogeneity, different industry classifications, and CFO incentive effects.

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  • Yiqing Tan, 2021. "Industry tournament incentives and audit fees," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 48(3-4), pages 587-612, March.
    • Handle: RePEc:bla:jbfnac:v:48:y:2021:i:3-4:p:587-612
    DOI: 10.1111/jbfa.12493
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