Audit Committee Compensation and the Demand for Monitoring of the Financial Reporting Process
University of Chicago Booth School of Business
Rachel M. Hayes
University of Utah - David Eccles School of Business
Ohio State University - Fisher College of Business
July 31, 2009
Journal of Accounting and Economics, Forthcoming
We examine the relation between audit committee compensation and the demand for monitoring of the financial reporting process. We find that total compensation and cash retainers paid to audit committees are positively correlated with audit fees and the impact of the Sarbanes-Oxley Act, our proxies for the demand for monitoring. Our results are robust to the inclusion of audit committee quality, measured as the committee chair financial expertise. Our results suggest a recent willingness by firms to deviate from the historically prevalent one-size-fits-all approach to director pay in response to increased demands on audit committees and differential director expertise.
Number of Pages in PDF File: 47
Keywords: audit committees, board of director compensation, audit fees
JEL Classification: G30, M41, M49
Date posted: August 28, 2009
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