The State of the Literature on Audit Committee Compensation and Its Implications for Practice and Research

Hayek, Caroline

doi:10.2308/ciia-52177

Cited by 11 publications

(10 citation statements)

References 12 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…Our findings support the "incentive alignment" view by documenting that audit committee equity ownership may mitigate the agency conflicts. Second, previous research focuses mainly on the relationship between audit committee ownership and financial reporting quality (Hayek, 2018). We provide new insights into this proposition by documenting that audit committee ownership increases firm performance, without affecting financial reporting quality.…”

Section: Introductionmentioning

confidence: 85%

“…Compensating audit committee directors with stock options and shareholding could diminish the effectiveness, and challenge the objectivity, of audit committee members (Carcello and Neal, 2003;Magilke et al, 2009;Mangena and Pike, 2005;Mangena and Tauringana, 2008). Hayek (2018) has pointed out that the implications of audit committee compensation remain a highly debated area of corporate governance research. Our study contributes to the literature by studying the association between audit committee ownership and the cost of equity capital.…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Audit committee ownership and the cost of equity capital

Habib

Bhuiyan

2021

MAJ

View full text Add to dashboard Cite

Purpose This paper aims to investigate whether audit committee ownership (consisting of both equity holdings and option holdings) is associated with the cost of equity capital. Design/methodology/approach This paper uses regression analysis to examine the association between audit committee ownership and the cost of equity capital. The data set consists of 2,825 firm-year observations for companies listed on the ASX between 2001 and 2015. This paper also conducts tests to explore the mediating effects of financial reporting quality, firm performance and the risk of reporting problems, on the relation between audit committee ownership and cost of equity capital. Findings The analyses reveal that audit committee ownership reduces the firm’s cost of equity and, thereby, support the incentive alignment view. However, the association is driven primarily by audit committee equity ownership, with option holdings having an insignificant effect. This paper also finds that firm performance mediates the association between audit committee ownership and the cost of equity capital. Practical implications Findings of the existing corporate governance research relating to the cost of equity capital and audit committee ownership remain sparse in the context of “comply-or-explain” types of regulatory environment, like that of Australia. The findings indicate that principle-based discretionary governance arrangements, e.g. compensating audit committee members with company equity, may bring benefits to firms in terms of cheaper financing. Regulators, scholars and practitioners are invited to consider further the comprehensive implications of the structure and transparency of audit committee incentives on the effective functioning of security markets. Originality/value The effects of audit committee ownership on the cost of equity capital are an issue of direct economic consequence for equity investors. The main finding of this study, namely, that a firm with higher audit committee share ownership is likely to benefit from a lower cost of equity capital, therefore adds value to the limited extant literature.

show abstract

Section: Introductionmentioning

confidence: 85%

Section: Introductionmentioning

confidence: 99%

Audit committee ownership and the cost of equity capital

Habib

Bhuiyan

2021

MAJ

View full text Add to dashboard Cite

show abstract

“…Инвестиции являются неотъемлемой частью международного экономического порядка в условиях современной рыночной экономии. [16] Тем более, представители предпринимательства в Российской Федерации крайне заинтересованы лично в возможности принимать инвестиции на свои предприятия от представителей иностранного бизнеса, а также самим участвовать в глобальном инвестиционном рынке.…”

Section: методыunclassified

Problems of integration of the Russian Federation into the system of international standards of auditing

Khitskov

2021

Vestn. Voronež. gos. univ. inž. tehnol.

View full text Add to dashboard Cite

Russia's integration into the international legal economy is extremely difficult. The main reason for this is the much later transition of the Russian Federation to a market-based economic system. The Russian Federation is more focused on domestic legislation, and although international sources of regulation are recognized on its territory, they do not have the same authority as in the legal systems of the Western world. Therefore, an important part of Russia's integration into the international economy is the synchronization of financial regulation in national systems. The article is devoted to one of the key points of Russia's integration into the international economy: the implementation of international accounting regulations and audit rules. In turn, the international standards for the regulation of auditing activities, their main goal is to create a single legal regulation of accounting statements. The relevance of the topic is determined on the one hand, by the importance of international markets and the attractiveness of Russia for foreign investors, and on the other, by the many problems that arise when trying to implement the norms of international law in the national legal field. The article examines the immediate difficulties and problems, as well as legal conflicts that arose in the process of implementing the norms of international financial law in the Russian Federation. The basis of the study was the cause-and-effect relationships, which become the basis for the occurrence of the above-mentioned problems. The article analyzes the linguistic, legal, moral and ethical contradictions that accompany the process of implementing the norms of international financial law in the national legal system of the Russian Federation. The analysis involves the consideration of problems in accordance with the moments of their occurrence. Further in the article the ways of solving the mentioned problems, the possibilities of overcoming legal conflicts, the ways of overcoming social and ethical contradictions are considered. In addition to the analysis of the legal essence of the process of implementation of international financial reporting standards, the article examines the situation of the modern market of audit services and the impact of audit practices on the system of regulation of the legal relations under study.

show abstract

“…Given the audit committees' responsibilities, their decision-making faces greater levels of scrutiny. Factors, such as compensation, that influence these decisions and the long-term mindset of the audit committee are increasingly important to researchers, regulators and directors (Hayek, 2018).…”

Section: Introductionmentioning

confidence: 99%

“…Thus, the decision to hire or fire an auditor should be made with the interests of shareholders in mind. Consequently, companies continue to offer equity compensation as an effort to align audit committee members interests with the interests of shareholders (Hayek, 2018). However, the decision to compensate audit committee members with additional equity has created many discussions about its efficacy.…”

Section: Introductionmentioning

confidence: 99%

The effect of cash versus equity compensation on audit committee decision-making - evidence from the 2007 Deloitte censure

Behrend

Pitman

2021

MAJ

View full text Add to dashboard Cite

Purpose This study aims to investigate the effect of cash versus equity compensation on audit committee decision-making after the Public Companies Oversight Board’s 2007 censure of Deloitte. Design/methodology/approach Using a sample of 2,588 firms, this paper uses two different compensation measurements to empirically examine the effect of audit committee compensation on decision-making. Findings The authors find that audit committee compensation effects the post-censure decision-making of Deloitte’s clients. The results support the hypothesis that cash compensation paid to audit committees influences audit committee members to retain their auditors post-censure. Additionally, there is some evidence to support the hypothesis that equity compensation increases the propensity to switch auditors post-censure. Practical implications This study will be of interest to regulators, policymakers and researchers as it provides further evidence in the area of audit committee decision-making and the effect of cash and stock compensation paid to audit committee members. Originality/value This study provides empirical evidence of the association between audit committee compensation and audit committee decision-making by investigating the effect of cash-based compensation and stock-based compensation on audit committee decision-making.

show abstract

The State of the Literature on Audit Committee Compensation and Its Implications for Practice and Research

Cited by 11 publications

References 12 publications

Audit committee ownership and the cost of equity capital

Audit committee ownership and the cost of equity capital

Problems of integration of the Russian Federation into the system of international standards of auditing

The effect of cash versus equity compensation on audit committee decision-making - evidence from the 2007 Deloitte censure

Contact Info

Product

Resources

About