Conditional Conservatism and Audit Fees

2014 ◽  
Vol 29 (1) ◽  
pp. 83-113 ◽  
Author(s):  
Hye Seung (Grace) Lee ◽  
Xu Li ◽  
Heibatollah Sami
Keyword(s):  
Corporate Governance ◽  
Potential Benefit ◽  
Audit Fees ◽  
Accounting Conservatism ◽  
Audit Risk ◽  
Debt Contracting ◽  
Conditional Conservatism ◽  
Governance Quality ◽  
Corporate Governance Quality ◽  
The Impact

SYNOPSIS In this study, we examine the impact of conditional conservatism on audit fees and, more importantly, the influence of corporate governance on this relationship. Prior literature presents evidence regarding explanations for the existence and pervasiveness of accounting conservatism such as compensation and debt contracting, shareholder litigation, taxation, and accounting regulation. However, there is very limited evidence or discussion of the potential benefit of accounting conservatism on audit risk and thus audit fees, and how the potential benefit can be attenuated by corporate governance quality. Using a sample of firm-year observations over the period of 2004–2009, we provide evidence consistent with conditional conservatism and firms' commitment to such conservatism reducing their audit fees. However, our evidence shows that this reduction in audit fees is moderated by higher corporate governance quality. These results have implications for auditors, regulators, standard setters, and firms' managers. In addition, our study extends the literature on the determinants of audit fees. JEL Classifications: M41; M42; D81; D22.

Shareholder Litigation and Conservative Accounting: Evidence from Universal Demand Laws

2020 ◽  
Author(s):  
Hariom Manchiraju ◽  
Vivek Pandey ◽  
K. R. Subramanyam
Keyword(s):  
Corporate Governance ◽  
Insider Trading ◽  
Accounting Conservatism ◽  
Litigation Risk ◽  
Short Term ◽  
Conservative Accounting ◽  
Shareholder Litigation ◽  
Ex Ante ◽  
Governance Quality ◽  
Corporate Governance Quality

We use the staggered adoption of the Universal Demand Laws (UD Laws) to examine the effect of an exogenous reduction in shareholders' ability to litigate on the extent of accounting conservatism. On average, we find an increase in reporting conservatism post UD. The increased conservatism is concentrated in firms contemplating equity issuance, with high proportion of monitoring investors, and high corporate governance quality. In contrast, firms with specific short-term incentives for aggressive accounting, such as those narrowly beating benchmarks, those with abnormal insider trading and those likely to violate debt covenants, weakly governed firms, and firms with high ex ante litigation risk decrease reporting conservatism after UD. Our results suggest that the relation between the litigation environment and reporting conservatism is complex and dependent on specific characteristics and unique circumstances of the firms.

scholarly journals Corporate Governance Quality and Cash Conversion Cycle: Evidence from Jordan

2016 ◽  
Vol 9 (10) ◽  
pp. 140
Author(s):  
Ayat S. Al-Rahahleh
Keyword(s):  
Corporate Governance ◽  
Stock Exchange ◽  
Firm Characteristics ◽  
Cash Conversion Cycle ◽  
Industrial Companies ◽  
Governance Quality ◽  
Context Dependent ◽  
Corporate Governance Quality ◽  
The One ◽  
The Impact

<p class="1main-text">This study aims at examining the impact of corporate governance quality on cash conversion cycle (CCC) in Jordan. Using OLS regression for a sample of all industrial companies listed on Amman Stock Exchange during the period (2009-2013). The results revealed that CCC is affected negatively by corporate governance quality, which provides an implication to industrial companies in Jordan to boost their compliance with corporate governance code in order to improve their working capital management efficiency. Furthermore, the outcomes showed a variation in corporate governance categories between sub-samples, which supports contingency theory that rejects the approach of “one size fits all”. The findings provide implications for future studies to deal with firm characteristics as context dependent rather than simply as control variables. The results also provide implications for regulatory bodies in Jordan that highlight the importance of “comply or explain” approach to some corporate governance rules embracing the “one size does not fit all” approach. This study fills a gap in the existing literature by studying the quality of corporate governance and by using the context dependent approach.</p>

scholarly journals Corporate Governance, CEO Compensation and Accounting Conservatism

2021 ◽  
Vol 14 (1) ◽  
pp. 80-95
Author(s):  
Pakamas Srichoke ◽  
Georgios Georgakopoulos ◽  
Alexandros Sikalidis ◽  
Athina Sotiropoulou
Keyword(s):  
Corporate Governance ◽  
Ceo Compensation ◽  
Accounting Conservatism ◽  
Governance Quality ◽  
Corporate Governance Quality ◽  
Ceo Bonus

Purpose:This study examines the moderating impact of corporate governance quality on the relation between CEO bonus compensation and accounting conservatism.

scholarly journals Corporate governance and the characteristics of the board of directors: Evidence from an emerging market

2019 ◽  
Vol 15 (1) ◽  
pp. 17-24 ◽  
Author(s):  
Ahmed S. Alanazi
Keyword(s):  
Corporate Governance ◽  
Middle East ◽  
Board Of Directors ◽  
Emerging Market ◽  
Fiscal Year ◽  
Board Characteristics ◽  
The Board Of Directors ◽  
Governance Quality ◽  
Corporate Governance Quality ◽  
The Impact

The aim of this paper is to investigate the impact of the characteristics of the board of directors on the quality of corporate governance. The paper attempts to uncover the board characteristics that contribute to better corporate governance quality. The paper exploits a unique dataset of the corporate governance index developed by the Corporate Governance Centre for the 92 largest Saudi listed firms for the fiscal year of 2015. Several board characteristics are regressed on the corporate governance scores to find an association. The size of the board of directors is positively associated with better corporate governance quality. In other words, large boards have better corporate governance. Furthermore, large block-holders and government ownership contribute significantly to better corporate governance quality. Contrary to expectations, independent members are negatively linked to corporate governance quality. Companies with a large number of independent members show lower corporate governance quality. Finally, other characteristics of board committees and boards meetings do not show links to corporate governance quality. To the best of the author’s knowledge, this is the first paper to attempt to uncover the association between the characteristics of the board of directors and corporate governance quality in the Middle-East (the emerging market of Saudi Arabia). Several papers attempted to study governance issues in the Middle-East, but no direct examination of board characteristics and governance quality was conducted. Most studies investigated the issue of corporate governance and firm performance.

Corporate governance, directors' and officers' insurance premiums and audit fees

2014 ◽  
Vol 29 (2) ◽  
pp. 173-195 ◽  
Author(s):  
Hyeesoo H. Chung ◽  
Jinyoung P. Wynn
Keyword(s):  
Corporate Governance ◽  
Positive Association ◽  
Audit Fees ◽  
Structural Features ◽  
Small Sample ◽  
Content Type ◽  
Insurance Premiums ◽  
Governance Quality ◽  
Directors And Officers ◽  
The Impact

Purpose – This study aims to examine the association between corporate governance and audit fees using directors' and officers' (D&O) insurance premiums as a proxy for overall governance quality. The use of an overall governance measure that captures both structural and non-structural governance features may shed light on the association between governance and audit fees, which is known to be inconclusive in the literature. Design/methodology/approach – The authors employ D&O insurance premiums as a proxy for governance quality that reflects both the structural features and non-structural features of governance. D&O insurance premiums are hand-collected from a proxy circular of Canadian firms. Multivariate regression analyses are used for testing. Findings – The authors find a positive association between D&O premiums and audit fees, suggesting that auditors charge higher fees to firms with heightened corporate governance risk. Even after controlling for structural governance variables in the regression model, the authors find a significantly positive association between D&O premiums and audit fees. Research limitations/implications – The findings suggest that mandatory disclosures of D&O insurance policies can be useful for market participants. This study uses a relatively small sample of Canadian firms. A larger sample could strengthen the implications of the findings. Originality/value – The findings suggest that structural features of governance may be insufficient to provide a full understanding of the impact of corporate governance on audit pricing and add to the understanding of the determinants of audit fees.

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