CEO Domination, Growth Opportunities, and their Impact on Audit Fees

Judy S. L. Tsui; Ferdinand A. Gul; Bikki Jaggi

doi:10.1177/0148558X0101600303

CEO Domination, Growth Opportunities, and their Impact on Audit Fees

Judy S. L. Tsui
, Ferdinand A. Gul
, Bikki Jaggi

City University of Hong Kong

Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review

168 Citations (Scopus)

Abstract

This study examines the relationship between a firm’s internal monitoring mechanism and its impact on the audit fee. The first hypothesis investigates whether firms with independent corporate boards (chief executive officer and chairman being separate individuals) provide a more effective internal monitoring mechanism and are thus associated with lower control risk, resulting in lower audit effort and fees as compared to nonindependent, CEO-dominated boards. The second hypothesis examines whether the effectiveness of the internal monitoring mechanism provided by independent corporate boards is independent of the firms’ growth opportunities. High-growth firms are by nature more difficult to monitor due to the existence of discretionary investments and measurement problems associated with future assets. Thus, the negative association between independent corporate boards and audit fees is expected to be affected by a firm’s growth. Results using 650 observations from Hong Kong companies provide support for both hypotheses. © 2001, SAGE Publications. All rights reserved.

Original language	English
Pages (from-to)	189-208
Journal	Journal of Accounting, Auditing & Finance
Volume	16
Issue number	3
DOIs	https://doi.org/10.1177/0148558X0101600303
Publication status	Published - Jul 2001

Bibliographical note

Publication details (e.g. title, author(s), publication statuses and dates) are captured on an “AS IS” and “AS AVAILABLE” basis at the time of record harvesting from the data source. Suggestions for further amendments or supplementary information can be sent to [email protected].

Funding

The authors gratefully acknowledge Stuart Wong's assistance in data collection and statistical analyses and financial assistance from the Accounting and Corporate Law Centre, City University of Hong Kong, and the UGC, Hong Kong.

RGC Funding Information

RGC-funded

Access Output

10.1177/0148558X0101600303

Other Access Options

Check CityUHK Library

Permanent Link

Right click to copy link

Cite this

@article{1aec19c558304efdab032c0c8f3a4052,

title = "CEO Domination, Growth Opportunities, and their Impact on Audit Fees",

abstract = "This study examines the relationship between a firm{\textquoteright}s internal monitoring mechanism and its impact on the audit fee. The first hypothesis investigates whether firms with independent corporate boards (chief executive officer and chairman being separate individuals) provide a more effective internal monitoring mechanism and are thus associated with lower control risk, resulting in lower audit effort and fees as compared to nonindependent, CEO-dominated boards. The second hypothesis examines whether the effectiveness of the internal monitoring mechanism provided by independent corporate boards is independent of the firms{\textquoteright} growth opportunities. High-growth firms are by nature more difficult to monitor due to the existence of discretionary investments and measurement problems associated with future assets. Thus, the negative association between independent corporate boards and audit fees is expected to be affected by a firm{\textquoteright}s growth. Results using 650 observations from Hong Kong companies provide support for both hypotheses. {\textcopyright} 2001, SAGE Publications. All rights reserved.",

author = "Tsui, \{Judy S. L.\} and Gul, \{Ferdinand A.\} and Bikki Jaggi",

note = "Publication details (e.g. title, author(s), publication statuses and dates) are captured on an “AS IS” and “AS AVAILABLE” basis at the time of record harvesting from the data source. Suggestions for further amendments or supplementary information can be sent to [email protected].",

year = "2001",

month = jul,

doi = "10.1177/0148558X0101600303",

language = "English",

volume = "16",

pages = "189--208",

journal = "Journal of Accounting, Auditing \& Finance",

issn = "0148-558X",

publisher = "Sage Publications",

number = "3",

}

TY - JOUR

T1 - CEO Domination, Growth Opportunities, and their Impact on Audit Fees

AU - Tsui, Judy S. L.

AU - Gul, Ferdinand A.

AU - Jaggi, Bikki

N1 - Publication details (e.g. title, author(s), publication statuses and dates) are captured on an “AS IS” and “AS AVAILABLE” basis at the time of record harvesting from the data source. Suggestions for further amendments or supplementary information can be sent to [email protected].

PY - 2001/7

Y1 - 2001/7

N2 - This study examines the relationship between a firm’s internal monitoring mechanism and its impact on the audit fee. The first hypothesis investigates whether firms with independent corporate boards (chief executive officer and chairman being separate individuals) provide a more effective internal monitoring mechanism and are thus associated with lower control risk, resulting in lower audit effort and fees as compared to nonindependent, CEO-dominated boards. The second hypothesis examines whether the effectiveness of the internal monitoring mechanism provided by independent corporate boards is independent of the firms’ growth opportunities. High-growth firms are by nature more difficult to monitor due to the existence of discretionary investments and measurement problems associated with future assets. Thus, the negative association between independent corporate boards and audit fees is expected to be affected by a firm’s growth. Results using 650 observations from Hong Kong companies provide support for both hypotheses. © 2001, SAGE Publications. All rights reserved.

AB - This study examines the relationship between a firm’s internal monitoring mechanism and its impact on the audit fee. The first hypothesis investigates whether firms with independent corporate boards (chief executive officer and chairman being separate individuals) provide a more effective internal monitoring mechanism and are thus associated with lower control risk, resulting in lower audit effort and fees as compared to nonindependent, CEO-dominated boards. The second hypothesis examines whether the effectiveness of the internal monitoring mechanism provided by independent corporate boards is independent of the firms’ growth opportunities. High-growth firms are by nature more difficult to monitor due to the existence of discretionary investments and measurement problems associated with future assets. Thus, the negative association between independent corporate boards and audit fees is expected to be affected by a firm’s growth. Results using 650 observations from Hong Kong companies provide support for both hypotheses. © 2001, SAGE Publications. All rights reserved.

UR - https://www.scopus.com/pages/publications/84990397333

UR - https://www.scopus.com/record/pubmetrics.uri?eid=2-s2.0-84990397333&origin=recordpage

U2 - 10.1177/0148558X0101600303

DO - 10.1177/0148558X0101600303

M3 - RGC 21 - Publication in refereed journal

SN - 0148-558X

VL - 16

SP - 189

EP - 208

JO - Journal of Accounting, Auditing & Finance

JF - Journal of Accounting, Auditing & Finance

IS - 3

ER -

CEO Domination, Growth Opportunities, and their Impact on Audit Fees

Abstract

Bibliographical note

Funding

RGC Funding Information

Access Output

Other Access Options

Permanent Link

Other Files and Links

Fingerprint

Cite this