Corporative performance, Auditor independence, and the Executive Salary

Abstract

We proposed a nonlinear, two-stage LS method that accounts for the simultaneity of the salary of executives,corporative performance and the audit / non-audit fees. The result shows that there is a significant negative relationship between non-audit fees and the sensitivity of chief executive officer (CEO) pay to firm performance. The result suggests that the reduced weight applied to accounting performance lowers the incentive component of executive pay between roughly 5 and 8 per cent for the performance of the executives.