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Managerial ability, financial distress and audit fees
journal contribution
posted on 2018-03-01, 00:00 authored by Ferdinand GulFerdinand Gul, M Khedmati, Edwin LimEdwin Lim, F NavissiThis study examines whether the relationship between managerial ability and audit fees is conditional on financial distress. We find that higher managerial ability increases audit fees in financially distressed firms, and decreases audit fees in non-distressed firms. We also observe that financially distressed firms with higher ability managers display lower accrual quality and a higher likelihood of restatement. Moreover, higher ability managers in distressed firms engage more in opportunistic financial reporting to concurrently maximize equity-based compensation and cope with debt refinancing pressures, which increases audit risks and results in greater audit fees. We confirm our results using a battery of sensitivity and additional analyses.
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Journal
Accounting horizonsVolume
32Issue
1Pagination
29 - 51Publisher
American Accounting AssociationLocation
Lakewood Ranch, Fla.Publisher DOI
ISSN
0888-7993Language
engPublication classification
C Journal article; C1 Refereed article in a scholarly journalCopyright notice
[2017, American Accounting Association]Usage metrics
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