Impact of Excess Auditor Remuneration on the Cost of Equity Capital around the World

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dc.contributor.authorOle-Kristian Hope
dc.contributor.authorTony Kang
dc.contributor.authorWayne B. Thomas
dc.contributor.authorYong Keun Yoo
dc.date.accessioned2016-01-14T19:52:56Z
dc.date.accessioned2016-03-30T15:34:05Z
dc.date.available2016-01-14T19:52:56Z
dc.date.available2016-03-30T15:34:05Z
dc.date.issued2009-04-01
dc.description.abstractThis study examines the relation between excess auditor remuneration and the implied required rate of return (IRR hereafter) on equity capital in global markets. We conjecture that when auditor remuneration is excessively large, investors may perceive the auditor to be economically bonded to the client, leading to a lack of independence. This perceived lack of independence increases the information risk associated with the credibility of financial statements, thereby increasing IRR. Consistent with this notion, we find that IRR is increasing in excess auditor remuneration, but only in countries with stronger investor protection. Finding evidence of a relation only in stronger investor protection countries is consistent with the more prominent role of audited financial statements for investors' decisions in these countries. In settings in which investors are less likely to rely on audited financial statements and instead rely on alternative sources of information (i.e., in countries with weaker investor protection), the impact of client-auditor bonding should have less of an effect on investors' decisions.en_US
dc.description.peerreviewYesen_US
dc.description.peerreviewnoteshttps://us.sagepub.com/en-us/nam/manuscript-submission-guidelinesen_US
dc.identifier.citationHope, O.-K., Kang, T., Thomas, W. B., & Yoo, Y. K. (2009). Impact of Excess Auditor Remuneration on the Cost of Equity Capital around the World. Journal of Accounting, Auditing & Finance, 24(2), 177-210. doi: 10.1177/0148558x0902400203en_US
dc.identifier.doi10.1177/0148558x0902400203en_US
dc.identifier.urihttp://hdl.handle.net/11244/24981
dc.language.isoen_USen_US
dc.publisherJournal of Accounting, Auditing & Finance
dc.rights.requestablefalseen_US
dc.titleImpact of Excess Auditor Remuneration on the Cost of Equity Capital around the Worlden_US
dc.typeResearch Articleen_US

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