Author: Xu, Jun
Title: Overlap of board members, the CEO compensation and audit fees
Degree: M.Sc.
Year: 2015
Subject: Chief executive officers -- Salaries, etc.
Accounting -- Management
Hong Kong Polytechnic University -- Dissertations
Department: School of Accounting and Finance
Pages: 60 pages : illustrations
Language: English
Abstract: I analyze the relationship between the overlap of board members and the CEOs compensation. If the members of audit committee and compensation committee are overlapped, then the directors who sit in both committees will worry about the costs and efforts they have to pay to monitor the financial reporting process. Such concern will make them lower the pay-performance sensitivities of the CEOs compensation. Conversely, if the tasks of setting compensation and monitoring financial reporting process are assigned to different people, the pay-performance sensitivity will be higher. Increased compensation pay will become motivation for the CEOs to engage in earnings management, putting the directors in audit committee under greater pressure to diligently perform the monitoring work. I find that the pay-performance sensitivities of the CEOs compensation decrease with the overlap of directors in the audit committee and compensation committee. Besides, I also find that the audit fees increase with the separation of directors in the two committees.
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