Does the executive pay gap affect audit risk?

Xinrui Chen; Yenan Guo

doi:10.54691/bcpbm.v49i.5435

Authors

Xinrui Chen
Yenan Guo

DOI:

https://doi.org/10.54691/bcpbm.v49i.5435

Keywords:

Executive pay gap; Audit risk; Entity investment level; Agency costs; Inefficient investment

Abstract

This paper uses 2013-2022 panel data of A-share listed companies (excluding ST and financial sector) in China as a research sample to conduct a study on the impact of executive pay gap on audit risk. It is found that an increase in executive pay gap brings more audit risk; the heterogeneity test results show that the impact of executive pay gap on audit risk is more significant in non-state-owned enterprises and large-scale enterprises; the reduction of the level of entity investment and agency costs are important channels through which executive pay gap affects audit risk. The study provides a theoretical basis for enterprises to improve their executive compensation management systems, and provides useful suggestions for external audit bodies to effectively conduct risk assessment and risk response.

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