Auditors Governance Role in Emerging Markets: Evidence from China
We examine whether auditors serve the governance role by providing a bonding mechanism to mitigate managershareholder conflicts in emerging markets by investigating the influence of audit quality on the sensitivity of executive compensation to accounting performance. We execute a two-step procedure and find evidence that audit quality remains significantly related to the pay-earnings relation. Results show that the pay-earnings sensitivities of Big Ten clients are statistically significantly higher than for non-Big Ten clients. The results obtained in a switch sample of firms grouped according to shifts from and to Big Ten and non-Big Ten auditor with respect to the inclusion of other explanatory factors for pay-earnings relation that have been suggested by previous studies. Taken together, the results suggest that audit quality plays an important role in the use of accounting information in executive compensation contracts and that Big Ten auditors in China do have a corporate governance role by alleviating the manager-shareholder conflicts.
audit quality earning quality compensation change
JIANG Ximing LIU Xiyou
Central University of Finance & Economics, P.R.China, 100081 & Xinjiang University of Finance & Econ Renmin University of China, P.R.China, 100081
国际会议
天津
英文
337-344
2009-12-12（万方平台首次上网日期，不代表论文的发表时间）