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Purpose This paper aims to investigate whether audit fees and financial report readability are bi-directionally related. Design/methodology/approach The authors test their hypotheses with empirical data. Specifically, they adopt a two-stage simultaneous equation regression model to assess the bi-directional relationship between audit fees and financial report readability. Findings While poor readability increases the fees charged by the auditor, higher audit fees improve the readability of the financial reports. Research limitations/implications This study is based on US data. Future research may extend this study to other countries. Practical implications Poor financial report readability encumbers stakeholders of the firms. Understanding the interaction between financial report readability and audit fees will help both auditors and firm managers. Social implications Audit committees aggressively negotiating for lower audit fees should be aware of the link of low audit fees, potentially indicative of poor quality, to less readable reports. Investors and regulators too should be concerned about this relationship, especially in instances when auditors low-ball audit fees or when firms aggressively negotiate for lower audit fees. Originality/value To the best of authors’ knowledge, this study is the first to document the bi-directional relationship between financial report readability and audit fees and assess the positive impact of audit fees on financial report readability.

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Purpose The purpose of this study is to investigate the impact of the age diversity of the top management team (TMT) on firm performance and on the managerial ability of the TMT. Furthermore, this study investigates how the relationship between age diversity and firm performance is mediated by managerial ability and the contextual nature of the relationship. Design/methodology/approach This is an empirical study which uses regression analyses and mediation analyses to evaluate the hypotheses. Findings The authors observe a negative relationship between age diversity and firm performance and also between age diversity and managerial ability of the TMT. Further, the authors find that that the negative relationship between age diversity and firm performance is mediated by managerial ability. The authors also find that the relation between performance and age diversity is context specific – the negative relationship between age diversity and firm performance is ameliorated during times of financial crisis. Social implications In an environment where diversity is beginning to be valued, insights into the impact of different types of diversity on performance become important. Age diversity is a critical component of diversity. Therefore, insights into the impact of age diversity on performance will be of interest to managers, academics and even regulators. Originality/value To the best of the authors’ knowledge, this study is the first to evaluate the impact of age diversity on the market perception of firm performance of US firms using a large, comprehensive, multi-year data set. Furthermore, this is the only study to evaluate the impact of age diversity on managerial ability and show the mediating effect of managerial ability on the relationship between age diversity and firm performance.

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