Industry tournament incentives and audit fees

Tan, Yiqing

doi:10.1111/jbfa.12493

Cited by 22 publications

(12 citation statements)

References 123 publications

(153 reference statements)

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“…Therefore, the aggressiveness driven by high CEO–CFO pay disparities are beneficial to firms. Our findings support the value‐creating strategic investment hypothesis (Huang et al., 2019; Tan, 2021) in regard to tournament incentives.…”

Section: Implications For Firm Valuesupporting

confidence: 88%

“…Our results suggest that the CEO–CFO pay disparities provide CFOs with tournament incentives that prompt CFOs to expend greater effort in selecting value‐enhancing projects, which in turn increases firm outputs. Our findings are consistent with the value‐creating strategic investment hypothesis suggested by prior study (Huang et al., 2019; Tan, 2021).…”

Section: Introductionsupporting

confidence: 93%

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Impact of pay disparities between chief executive officers and chief financial officers on corporate financial and investment policies

Feng

Che

2021

Financ Manag Account

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We study whether and how pay disparities between chief executive officers (CEOs) and chief financial officers (CFOs) affect corporate policies. Consistent with the tournament theory, we find a positive association between the CEO–CFO pay disparity and aggressiveness in corporate financial and investment policies. Specifically, a firm with a large CEO–CFO pay disparity tends to have an aggressive capital structure and tilt toward high‐risk investments. Furthermore, we test the impact of the CEO–CFO pay disparity on firm value and show that the pay disparity is positively associated with firm value. Overall, we conclude that CEO–CFO pay disparities provide CFOs with tournament incentives to not only adopt aggressive corporate policies but also select better investment projects. Our research highlights the career‐enhancing and value‐creating effects of CEO–CFO pay disparities as well as the important role of CFOs’ incentives on the treasurer side of their duties.

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Section: Implications For Firm Valuesupporting

confidence: 88%

Section: Introductionsupporting

confidence: 93%

Impact of pay disparities between chief executive officers and chief financial officers on corporate financial and investment policies

Feng

Che

2021

Financ Manag Account

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“…document distortions in corporate disclosure driven by industry tournament incentives. Tan (2021) shows evidence of industry tournament incentives reducing audit fees. It is widely recognized that innovation is a significant driver of long-run economic growth.…”

Section: Introductionmentioning

confidence: 99%

Industry tournament incentives and corporate innovation

Nguyen

Zhao

2021

Business Fin & Account

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Our paper examines the relationship between industry tournament incentives for CEOs and corporate innovation. We find that the external pay gap is positively associated with subsequent innovation output and its economic value. Our results are robust to using different industry classifications, alternative measures of industry tournament incentives and innovation, and various controls for corporate governance, business strategy, and CEO attributes. We employ a quasi-natural experiment and an instrumental-variable approach to mitigate endogeneity concerns. We also find evidence of a positive and significant relationship between industry tournament incentives and idiosyncratic risk. Overall, the evidence is consistent with our contention that aspirant CEOs undertake innovation projects which can generate uncertain but potentially rewarding outcomes that increase the likelihood of the aspirant standing out and winning the tournament or extracting the tournament-induced benefits internally.

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“…Chen et al (2015) add to this literature by showing that executive risk incentives embedded in the compensation contracts also explain the pricing of auditing services. Tan (2021) documents that industry tournament incentives of CEOs, derived from the compensation gap, affects audit fees. Executive compensation is mainly determined by the board of directors, related to several firm characteristics and strategies, and frequently changes over time.…”

Section: Introductionmentioning

confidence: 99%

CEO cultural heritage and the pricing of audit services

Pham

Truong

2021

Business Fin & Account

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We construct preferences toward risk and uncertainty as reflected in the cultural heritage of chief executive officers (CEOs) managing public firms in the United States. We demonstrate that auditors take into account the cultural traits of CEOs in the pricing of their audit services. We also show that CEO cultural heritage is associated with a firm's misreporting, internal control weakness, and accounting conservatism. The results are robust to controlling for other known attributes of CEOs, firm characteristics, and corporate governance. Our study contributes to research on corporate risk culture, CEO characteristics, and determinants of the pricing of audit services and financial reporting quality.

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Industry tournament incentives and audit fees

Cited by 22 publications

References 123 publications

Impact of pay disparities between chief executive officers and chief financial officers on corporate financial and investment policies

Impact of pay disparities between chief executive officers and chief financial officers on corporate financial and investment policies

Industry tournament incentives and corporate innovation

CEO cultural heritage and the pricing of audit services

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