The Effects of Auditor Social and Human Capital on Auditor Compensation: Evidence from the Italian Small Audit Firm Market

Forthcoming, European Accounting Review

50 Pages Posted: 9 Jul 2019

See all articles by Pietro A. Bianchi

Pietro A. Bianchi

Florida International University (FIU)

Nieves Carrera

IE Business School - IE University

Marco Trombetta

IE Business School - IE University

Date Written: May 30, 2019

Abstract

This study examines whether social and human capital influence the compensation of individual auditors in the small audit firm market. We employ a sample of Italian auditors and use measures from the network and auditing literatures to capture their professional connections, representing social capital, and their industry expertise, representing human capital. Our findings show a positive and economically meaningful association between these individual attributes and auditor compensation. We run several tests to address potential endogeneity issues in our research design. Our results suggest that, in the small audit market, clients perceive as valuable those auditors with higher social and human capital, and as a result, are willing to pay a premium for these specific auditor attributes.

Keywords: small audit firm market, auditor compensation, audit fees, social capital, human capital

JEL Classification: M4, M40, M41, M42, M49

Suggested Citation

Bianchi, Pietro A. and Carrera, Nieves and Trombetta, Marco, The Effects of Auditor Social and Human Capital on Auditor Compensation: Evidence from the Italian Small Audit Firm Market (May 30, 2019). Forthcoming, European Accounting Review, Available at SSRN: https://ssrn.com/abstract=3415727

Pietro A. Bianchi (Contact Author)

Florida International University (FIU) ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

Nieves Carrera

IE Business School - IE University ( email )

Calle Maria de Molina 12
Madrid, Madrid 28006
Spain

Marco Trombetta

IE Business School - IE University ( email )

Calle Maria de Molina 12
Madrid, Madrid 28006
Spain

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