20 Pages Posted: 4 May 2011
Date Written: June 2011
This study examines whether CEO duality affects the association between board independence and demand for higher quality audits, proxied by audit fee. The findings show that there is a positive association between board independence and audit fees. This result is consistent with findings of Carcello et al. (2002) that more independent boards demand higher audit quality and effort. However, this positive association is only present in firms without CEO duality, thus suggesting that CEO duality constrains board independence. The results support recommendations against CEO duality by showing that dominant CEOs may compromise the independence of their board of directors. Additionally, evidence is provided that board size (the number of directors on the board) is positively associated with audit fee pricing. This is consistent with prior studies that indicate that larger board sizes are associated with inefficiency and negative firm performance.
Keywords: Corporate governance, Independent directors, Board size, Audit fee pricing
JEL Classification: G34, M42
Suggested Citation: Suggested Citation
Bliss, Mark A., Does CEO Duality Constrain Board Independence? Some Evidence from Audit Pricing (June 2011). Accounting & Finance, Vol. 51, Issue 2, pp. 361-380, 2011. Available at SSRN: https://ssrn.com/abstract=1830926 or http://dx.doi.org/10.1111/j.1467-629X.2010.00360.x
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