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Corporate compensation policies and audit fees


  • Wysocki, Peter


Recent accounting research has started to investigate the links between corporate compensation and auditor compensation. Engel et al. (2010) take a first step to connect these previously distinct literatures by investigating the association between audit committee pay and audit fees. I discuss the findings of this study and then present complementary empirical evidence on the association between CEO compensation and audit fees. My descriptive empirical evidence suggests economically large co-variation in CEO compensation and audit fees. I conclude with suggestions for future research on the links between firms' corporate compensation and auditor compensation policies.

Suggested Citation

  • Wysocki, Peter, 2010. "Corporate compensation policies and audit fees," Journal of Accounting and Economics, Elsevier, vol. 49(1-2), pages 155-160, February.
  • Handle: RePEc:eee:jaecon:v:49:y:2010:i:1-2:p:155-160

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    References listed on IDEAS

    1. Brick, Ivan E. & Palmon, Oded & Wald, John K., 2006. "CEO compensation, director compensation, and firm performance: Evidence of cronyism?," Journal of Corporate Finance, Elsevier, vol. 12(3), pages 403-423, June.
    2. Yermack, David, 1995. "Do corporations award CEO stock options effectively?," Journal of Financial Economics, Elsevier, vol. 39(2-3), pages 237-269.
    3. John E. Core & Wayne R. Guay & David F. Larcker, 2003. "Executive equity compensation and incentives: a survey," Economic Policy Review, Federal Reserve Bank of New York, issue Apr, pages 27-50.
    4. David F. Larcker & Scott A. Richardson, 2004. "Fees Paid to Audit Firms, Accrual Choices, and Corporate Governance," Journal of Accounting Research, Wiley Blackwell, vol. 42(3), pages 625-658, June.
    5. Smith, Clifford Jr. & Watts, Ross L., 1992. "The investment opportunity set and corporate financing, dividend, and compensation policies," Journal of Financial Economics, Elsevier, vol. 32(3), pages 263-292, December.
    6. Shleifer, Andrei & Vishny, Robert W., 1989. "Management entrenchment : The case of manager-specific investments," Journal of Financial Economics, Elsevier, vol. 25(1), pages 123-139, November.
    7. Jin, Li, 2002. "CEO compensation, diversification, and incentives," Journal of Financial Economics, Elsevier, vol. 66(1), pages 29-63, October.
    8. Core, John & Guay, Wayne, 1999. "The use of equity grants to manage optimal equity incentive levels," Journal of Accounting and Economics, Elsevier, vol. 28(2), pages 151-184, December.
    9. Coles, Jeffrey L. & Daniel, Naveen D. & Naveen, Lalitha, 2006. "Managerial incentives and risk-taking," Journal of Financial Economics, Elsevier, vol. 79(2), pages 431-468, February.
    10. Mark L. DeFond, 2002. "Do Non-Audit Service Fees Impair Auditor Independence? Evidence from Going Concern Audit Opinions," Journal of Accounting Research, Wiley Blackwell, vol. 40(4), pages 1247-1274, September.
    11. Sherwin Rosen, 1982. "Authority, Control, and the Distribution of Earnings," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 311-323, Autumn.
    12. Canice Prendergast, 2002. "The Tenuous Trade-off between Risk and Incentives," Journal of Political Economy, University of Chicago Press, vol. 110(5), pages 1071-1102, October.
    13. Benjamin E. Hermalin, 2005. "Trends in Corporate Governance," Journal of Finance, American Finance Association, vol. 60(5), pages 2351-2384, October.
    14. Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April.
    15. Field, Laura & Lowry, Michelle & Shu, Susan, 2005. "Does disclosure deter or trigger litigation?," Journal of Accounting and Economics, Elsevier, vol. 39(3), pages 487-507, September.
    16. William R. Kinney & Zoe-Vonna Palmrose & Susan Scholz, 2004. "Auditor Independence, Non-Audit Services, and Restatements: Was the U.S. Government Right?," Journal of Accounting Research, Wiley Blackwell, vol. 42(3), pages 561-588, June.
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    Cited by:

    1. Zahid Irshad Younas & Haider Mahmood & Asif Saeed, 2013. "Effect of Firm Performance on Corporate Governance A Panel Data Analysis," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 3(1), pages 1-8, January.
    2. Rustam, Sehrish & Rashid, Kashif & Zaman, Khalid, 2013. "The relationship between audit committees, compensation incentives and corporate audit fees in Pakistan," Economic Modelling, Elsevier, vol. 31(C), pages 697-716.


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