TY - JOUR
T1 - Busy CEOs and audit fees
T2 - evidence from Indonesia
AU - Harymawan, Iman
AU - Putri, Fiona Vista
AU - Ratri, Melinda Cahyaning
AU - Nasih, Mohammad
N1 - Publisher Copyright:
© 2023, Emerald Publishing Limited.
PY - 2023/11/27
Y1 - 2023/11/27
N2 - Purpose: A company needs to use auditing procedures to ensure the reliability of financial statements while also providing transparency to stakeholders. The extent of risk associated with the company depends on the directors’ involvement in its daily operations. This paper aims to study the relationship between busy chief executive officers (CEOs) and audit fees. Design/methodology/approach: This study uses 1,037 data samples from companies listed on the Indonesia Stock Exchange from 2010 until 2018. It adopts the ordinary least squares method to test the hypothesis. Furthermore, this study performs robustness tests, such as propensity score matching (PSM) and Heckman’s two-stage least square tests (Heckman, 1979), to address the endogeneity issues. Findings: This study finds that the appearance of a busy CEO in a company will significantly increase the audit fee. It also concludes that a long tenure of a busy CEO will substantially weaken the positive relationship between the CEO and the audit fee. However, this study discovers that, in a company with a busy CEO, a monitoring mechanism through the independent commissioner and risk management committee will only help to maximize the firm’s practical risk evaluation a little. This result is robust because the PSM and Heckman tests display consistent results, so it is free from endogeneity issues. Practical implications: This study is valuable for theoretical and practical development in Indonesia. Due to the minimum regulation about multiple positions on boards in Indonesia, the shareholders must be aware of the need to choose a board with more skill and commitment to improve the position of the company. This result also warns the C-level of the company to pay more attention to its risk-monitoring process to make it more effective and efficient. Originality/value: Indonesia is one of the countries that have implemented the two-tier governance system. With the minimum regulation about multiple directorships in Indonesia, this study offers new insights into how a busy CEO will be related to the audit outcomes.
AB - Purpose: A company needs to use auditing procedures to ensure the reliability of financial statements while also providing transparency to stakeholders. The extent of risk associated with the company depends on the directors’ involvement in its daily operations. This paper aims to study the relationship between busy chief executive officers (CEOs) and audit fees. Design/methodology/approach: This study uses 1,037 data samples from companies listed on the Indonesia Stock Exchange from 2010 until 2018. It adopts the ordinary least squares method to test the hypothesis. Furthermore, this study performs robustness tests, such as propensity score matching (PSM) and Heckman’s two-stage least square tests (Heckman, 1979), to address the endogeneity issues. Findings: This study finds that the appearance of a busy CEO in a company will significantly increase the audit fee. It also concludes that a long tenure of a busy CEO will substantially weaken the positive relationship between the CEO and the audit fee. However, this study discovers that, in a company with a busy CEO, a monitoring mechanism through the independent commissioner and risk management committee will only help to maximize the firm’s practical risk evaluation a little. This result is robust because the PSM and Heckman tests display consistent results, so it is free from endogeneity issues. Practical implications: This study is valuable for theoretical and practical development in Indonesia. Due to the minimum regulation about multiple positions on boards in Indonesia, the shareholders must be aware of the need to choose a board with more skill and commitment to improve the position of the company. This result also warns the C-level of the company to pay more attention to its risk-monitoring process to make it more effective and efficient. Originality/value: Indonesia is one of the countries that have implemented the two-tier governance system. With the minimum regulation about multiple directorships in Indonesia, this study offers new insights into how a busy CEO will be related to the audit outcomes.
KW - Audit fee
KW - Busy CEO
KW - Governance
KW - Multiple directorships
UR - http://www.scopus.com/inward/record.url?scp=85170654383&partnerID=8YFLogxK
U2 - 10.1108/ARJ-01-2023-0003
DO - 10.1108/ARJ-01-2023-0003
M3 - Article
AN - SCOPUS:85170654383
SN - 1030-9616
VL - 36
SP - 497
EP - 514
JO - Accounting Research Journal
JF - Accounting Research Journal
IS - 6
ER -