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The Power of Reputation: Award‐winning CEOs and Audit Pricing

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Abacus

Published online on

Abstract

["Abacus, EarlyView. ", "\nThis study investigates how CEO reputation influences firms’ audit fees. Using prestigious business awards to measure positive shocks to CEO reputation, empirical evidence reveals that firms with nationally recognized CEOs exhibit significant reductions in external auditing fees compared to peer firms. The results hold for various robustness checks. Moreover, we find more pronounced negative relations between CEO reputation and audit fees for firms with weaker internal governance, CEOs who win more prestigious awards, firms with highly paid CEOs, and firms with greater analyst followings. Finally, we find that CEO reputation affects client risk proxied by return volatility, accounting quality, and internal control weakness, which in turn influences audit fees. Collectively, our results show that CEO reputation affects audit risk and pricing.\n"]