Interdependencies between Elements of Governance and Auditing : Evidence from Germany

Bremert, Michael ; Voeller, Dennis ; Zein, Nicole

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URN: urn:nbn:de:bsz:180-madoc-23240
Document Type: Working paper
Year of publication: 2007
The title of a journal, publication series: Rationalitätskonzepte, Entscheidungsverhalten und ökonomische Modellierung
Volume: 07-76
Place of publication: Mannheim
Edition: Version Dezember 2007
Publication language: English
Institution: School of Law and Economics > Sonstige - Fakultät für Rechtswissenschaft und Volkswirtschaftslehre
MADOC publication series: Sonderforschungsbereich 504 > Rationalitätskonzepte, Entscheidungsverhalten und ökonomische Modellierung (Laufzeit 1997 - 2008)
Subject: 330 Economics
Classification: JEL: M42 ,
Subject headings (SWD): Deutschland , Wirtschaftsprüfung , Gebühr , Corporate Governance , Führungskraft , Lohnsystem , Agency-Theorie
Keywords (English): Audit Fees , Corporate Governance , Management Compensation
Abstract: This study is the first to examine empirically the relation between audit fees, client and governance attributes in Germany. Auditing is an essential element in the system of corporate governance. Further elements include internal control institutions and management compensation. All these elements of corporate governance are designed to reduce agency problems and information asymmetries. Therefore, interdependencies between these instruments are likely to exist. This study differs from existing research on the association between audit fees and governance institutions as it explicitly considers the German governance regime with its two-tier board system. Using data from German stock market companies, we examine whether governance elements complement or substitute the monitoring role of auditing. After adjustments for size effects, the regression results suggest that the ratio of bonus to total payments as well as the existence of an audit committee significantly lower audit fees.

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