The effect of cash versus equity compensation on audit committee decision-making - evidence from the 2007 Deloitte censure
ISSN: 0268-6902
Article publication date: 13 December 2021
Issue publication date: 3 January 2022
Abstract
Purpose
This study aims to investigate the effect of cash versus equity compensation on audit committee decision-making after the Public Companies Oversight Board’s 2007 censure of Deloitte.
Design/methodology/approach
Using a sample of 2,588 firms, this paper uses two different compensation measurements to empirically examine the effect of audit committee compensation on decision-making.
Findings
The authors find that audit committee compensation effects the post-censure decision-making of Deloitte’s clients. The results support the hypothesis that cash compensation paid to audit committees influences audit committee members to retain their auditors post-censure. Additionally, there is some evidence to support the hypothesis that equity compensation increases the propensity to switch auditors post-censure.
Practical implications
This study will be of interest to regulators, policymakers and researchers as it provides further evidence in the area of audit committee decision-making and the effect of cash and stock compensation paid to audit committee members.
Originality/value
This study provides empirical evidence of the association between audit committee compensation and audit committee decision-making by investigating the effect of cash-based compensation and stock-based compensation on audit committee decision-making.
Keywords
Acknowledgements
The authors would like to express their appreciation to the two anonymous reviewers and the associate editor for their insightful comments.
Citation
Behrend, M.J. and Pitman, M.K. (2022), "The effect of cash versus equity compensation on audit committee decision-making - evidence from the 2007 Deloitte censure", Managerial Auditing Journal, Vol. 37 No. 1, pp. 1-16. https://doi.org/10.1108/MAJ-08-2019-2383
Publisher
:Emerald Publishing Limited
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