The relationship between director’s compensation and audit fee: Empirical evidence from developing countries

The present study investigates the correlation between director remuneration and audit fees within the context of a corporation operating in a developing nation. Additionally, this study investigates whether the extent of national consumption strengthens the association between director compensation...

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Published in:International Journal of Management and Sustainability
Main Author: Ardianto A.; Putri F.V.; Ghani N.A.; Mardijuwono A.W.; Rochmah H.N.; Soeprajitno R.W.N.
Format: Article
Language:English
Published: Conscientia Beam 2023
Online Access:https://www.scopus.com/inward/record.uri?eid=2-s2.0-85181938282&doi=10.18488%2f11.v12i4.3535&partnerID=40&md5=ec24241e305d68b995e04a4536206529
id 2-s2.0-85181938282
spelling 2-s2.0-85181938282
Ardianto A.; Putri F.V.; Ghani N.A.; Mardijuwono A.W.; Rochmah H.N.; Soeprajitno R.W.N.
The relationship between director’s compensation and audit fee: Empirical evidence from developing countries
2023
International Journal of Management and Sustainability
12
4
10.18488/11.v12i4.3535
https://www.scopus.com/inward/record.uri?eid=2-s2.0-85181938282&doi=10.18488%2f11.v12i4.3535&partnerID=40&md5=ec24241e305d68b995e04a4536206529
The present study investigates the correlation between director remuneration and audit fees within the context of a corporation operating in a developing nation. Additionally, this study investigates whether the extent of national consumption strengthens the association between director compensation and audit fees. This study employed the Ordinary Least Square (OLS) method to analyses a dataset consisting of 3,417 samples of non-financial firm data reported on the stock exchanges of Indonesia and Malaysia. The observation period for this study spanned from 2015 to 2019. The findings of this study indicate a substantial positive relationship between director salaries and audit fees in both countries. Furthermore, the evidence shows that the level of household consumption in a country will increase because of the positive relationship between director compensation and audit fees. In addition, CEOs and CFOs who have experience working as auditors carry a more negligible risk for the company. Meanwhile, directors' overcompensation will pose a greater risk for the company. This study is robust based on sensitivity testing using Coarsened Exact Matching (CEM) and Heckman regression. In general, the amount of compensation paid to the CEO shows the company's financial capacity, which reflects the company's liquidity and asset capabilities, which will be read as risk. Furthermore, the distinctiveness of the governance systems in these two countries, as observed in our sample, demonstrates a consistent outcome. © 2023 Conscientia Beam. All Rights Reserved.
Conscientia Beam
23069856
English
Article
All Open Access; Gold Open Access
author Ardianto A.; Putri F.V.; Ghani N.A.; Mardijuwono A.W.; Rochmah H.N.; Soeprajitno R.W.N.
spellingShingle Ardianto A.; Putri F.V.; Ghani N.A.; Mardijuwono A.W.; Rochmah H.N.; Soeprajitno R.W.N.
The relationship between director’s compensation and audit fee: Empirical evidence from developing countries
author_facet Ardianto A.; Putri F.V.; Ghani N.A.; Mardijuwono A.W.; Rochmah H.N.; Soeprajitno R.W.N.
author_sort Ardianto A.; Putri F.V.; Ghani N.A.; Mardijuwono A.W.; Rochmah H.N.; Soeprajitno R.W.N.
title The relationship between director’s compensation and audit fee: Empirical evidence from developing countries
title_short The relationship between director’s compensation and audit fee: Empirical evidence from developing countries
title_full The relationship between director’s compensation and audit fee: Empirical evidence from developing countries
title_fullStr The relationship between director’s compensation and audit fee: Empirical evidence from developing countries
title_full_unstemmed The relationship between director’s compensation and audit fee: Empirical evidence from developing countries
title_sort The relationship between director’s compensation and audit fee: Empirical evidence from developing countries
publishDate 2023
container_title International Journal of Management and Sustainability
container_volume 12
container_issue 4
doi_str_mv 10.18488/11.v12i4.3535
url https://www.scopus.com/inward/record.uri?eid=2-s2.0-85181938282&doi=10.18488%2f11.v12i4.3535&partnerID=40&md5=ec24241e305d68b995e04a4536206529
description The present study investigates the correlation between director remuneration and audit fees within the context of a corporation operating in a developing nation. Additionally, this study investigates whether the extent of national consumption strengthens the association between director compensation and audit fees. This study employed the Ordinary Least Square (OLS) method to analyses a dataset consisting of 3,417 samples of non-financial firm data reported on the stock exchanges of Indonesia and Malaysia. The observation period for this study spanned from 2015 to 2019. The findings of this study indicate a substantial positive relationship between director salaries and audit fees in both countries. Furthermore, the evidence shows that the level of household consumption in a country will increase because of the positive relationship between director compensation and audit fees. In addition, CEOs and CFOs who have experience working as auditors carry a more negligible risk for the company. Meanwhile, directors' overcompensation will pose a greater risk for the company. This study is robust based on sensitivity testing using Coarsened Exact Matching (CEM) and Heckman regression. In general, the amount of compensation paid to the CEO shows the company's financial capacity, which reflects the company's liquidity and asset capabilities, which will be read as risk. Furthermore, the distinctiveness of the governance systems in these two countries, as observed in our sample, demonstrates a consistent outcome. © 2023 Conscientia Beam. All Rights Reserved.
publisher Conscientia Beam
issn 23069856
language English
format Article
accesstype All Open Access; Gold Open Access
record_format scopus
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