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Korean Academic Society of Business Administration
[ Article ]
korean management review - Vol. 50, No. 1, pp.215-243
ISSN: 1226-1874 (Print)
Print publication date 28 Feb 2021
Received 03 Jun 2020 Revised 12 Sep 2020 Accepted 13 Oct 2020
DOI: https://doi.org/10.17287/kmr.2021.50.1.215

임원의 초과보상과 감사인의 대응 및 기업가치

Lin Jin ; Seung Uk Choi
(First Author) Department of Accounting and Taxation Kyung Hee University jinlin46@naver.com
(Corresponding Author) Department of Accounting and Taxation Kyung Hee University suchoi@khu.ac.kr
Auditors’ Responses to Executive Excess Compensation and Their Impact on Firm Value


Copyright 2011 THE KOREAN ACADEMIC SOCIETY OF BUSINESS ADMINISTRATION
This is an open access article distributed under the terms of the Creative Commons Attribution License 4.0, which permits unrestricted, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

This paper investigates the effect of executive excess compensation on audit fees, audit hours, and hourly fees. By using Korean listed firms from 2011 to 2017, current study documents the positive relation between executive excess compensation and audit fees. Furthermore, when we decompose audit fees into audit hours and hourly fees, the results are derived by audit hours only. Lastly, we find that the firm value increases as the interaction between audit fees and executive excess compensation increases. The results are similar when we use audit hours alternative to audit fee. Collectively, auditors’ efforts are largely invested in response to executives' excess compensation. Since recent regulation requires firms to report more sophisticated information on executive compensations, current study reflects this increasing interest of stakeholder and regulator on the compensation level of executives. Lastly, the presence of significant association between executive compensation and fees paid to auditors offers useful implication for investors and regulators in the capital market.

Keywords:

Executive Excess Compensation, Audit Fees, Audit Hours, Hourly Audit Fees, Firm Value

Acknowledgments

This paper is based on the Master’s Thesis of the first author at Kyung Hee University. We are grateful for the guidance from the committee members: Professor Hyung-Rok Jung and Professor Mun Ho Hwang. We also thank two anonymous referees for their constructive comments on this paper.

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∙ The author Lin Jin received Master‘s degree in Business from Kyung Hee University, Department of Accounting and Taxation. Her primary research interests are audit fees and audit quality.

∙ The author Seung Uk Choi is an assistant professor at School of Management, Department of Accounting and Taxation, Kyung Hee University. His recent research interests lie in integrating accounting and audit quality issues.