Interdependencies between Elements of Governance and Auditing: Evidence from Germany

Michael Bremert, Dennis Voeller and Nicole Zein

No 07-76, Papers from Sonderforschungsbreich 504

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.

Keywords: Audit Fees; Corporate Governance; Management Compensation (search for similar items in EconPapers)
JEL-codes: M42 (search for similar items in EconPapers)
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:mnh:spaper:2324

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