Association between CEO narcissism and audit fees
Keywords:
Upper echelons theory; Narcissism; Audit fees.
Abstract
Narcissistic personality traits in CEOs can have negative and positive implications for organizations. Aspects like internal control, client risk and risk complexity are sometimes influenced by narcissistic executives, potentially leading to higher audit fees. Thus, in light of the upper echelons theory, we conducted a descriptive study on the association between CEO narcissism and audit fees. The sample consisted of secondary data from 181 firms traded on B3 in the period 2015-2018. The collected data were compared with Student’s t test (difference between means), multiple linear regression and mediation analysis to test our study hypotheses. CEO narcissism was found to have a positive influence on audit fees, while the mediation analysis revealed that CEO narcissism impacted the variable ‘internal control’, represented by the audit committee, with positive effects on audit fees. Thus, the hypothesis that CEO narcissism influences audit fees could not be rejected, but the hypotheses regarding the role of material weakness and other significant internal control deficiencies and client risk and complexity as mediating variables between CEO narcissism and audit fees were rejected.
Downloads
Download data is not yet available.
References
AL-BASTAKI, H.; JOSHI, P. L. Determinants of audit fees: evidence from the companies listed in Bahrain. International Journal of Auditing, v.4, n.2, p. 129-138, 2000.
APOSTOLOU, B. A.; HASSELL, J. M.; JOHNSON, E. N.; J. R. KUHN, J. Auditor perceptions of client narcissism as a fraud attitude risk factor. A Journal of Practice & Theory, v. 32, n. 1, p. 203-219, 2013.
ÁVILA, J. R.; COSTA, P. D.; FÁVERO, L. P. Honorários de auditoria e book-tax differences. Revista de Contabilidade e Organizações, v. 11, n. 31, p. 31-46, 2017.
BACK, M. D.; SCHMUKLE, S. C.; EGLOFF, B. Why are narcissists so charming at first sight? Decoding the narcissism-popularity link at zero acquaintance. Journal of Personality and Social Psychology, v. 95, n. 1, p. 132-145, 2010.
BARON, R. M.; KENNY, D. A.. The moderator-mediator variable distinction in social psychological research: conceptual, strategic and statistical considerations. Journal of Personality and Social Psychology, v. 51, n. 6, p. 1173-1182, 1986.
BRIGHENTI, J.; DEGENHART, L.; CUNHA, P. R.. Fatores influentes nos honorários de auditoria: análise das empresas brasileiras listadas na BM&FBovespa. Pensar Contábil, v. 18, n.65, p.16-27, jan./abr. 2016).
BUYL, T.; BOONE, C.; WADE, J. B. CEO Narcissism, risk-taking, and resilience: An empirical analysis in US commercial banks. Journal of Management, v. 45, n. 4, p. 1372-1400, 2017.
CAMPBELL, W. K.; HOFFMAN, B. J.; CAMPBELL, S. M.; MARCHISIO, G. Narcissism in organizational contexts. Human Resource Management Review, v. 21,n. 4, p.268-284, 2011.
CARLSON, E. N.; VAZIRE, S.; OLTMANNS, T. F. You probably think this paper's about you: narcissists' perceptions of their personality and reputation. Journal of Personality and Social Psychology, v.101, n. 1, p. 185-201, 2011.
CARMO, C. H.; RIBEIRO, A. M.; CARVALHO, L. N. Convergência de fato ou de direito? A influência do sistema jurídico na aceitação das normas internacionais para pequenas e médias empresas. Revista Contabilidade & Finanças, v. 22, n. 57, p. 242-262, 2011.
CARPENTER, M. A.; GELETKANYCZ, M. A.; SANDERS, W. G. Upper echelons echelons research revisited: antecedents, elements, and consequences of top management team composition. Journal of Management, v. 30 n. 6, p. 749-778, 2004.
CASTRO, W. B.; PELEIAS, I. R.; SILVA, G. P. Determinantes dos honorários de auditoria: um estudo nas empresas listadas na BM&FBovespa, Brasil. Revista Contabilidade & Finanças, v. 26, n.69, p. 261-273, 2015.
CHATTERJEE, A.; HAMBRICK, D. C. It’s all about me: narcissistic chief executive officers and their effects on company strategy and. Administrative Science Quarterly, v. 52, n. 3, p. 351-386, 2007.
CHENG, M.; DHALIWAL, D.; ZHANG, Y.. Does investment efficiency improve after the disclosure ofmaterial weaknesses in internal control over financial reporting? Journal of Accounting and Economics, v. 56, n. 1, p. 1-18, 2013.
CFC. Conselho Federal Contabilidade. NBC TA 70 - Comunicação dos principais assuntos de auditoria no relatório do auditor independente, de 04 de julho de 2016. 2019, disponível em: https://cfc.org.br/tecnica/normas-brasileiras-de-contabilidade/. Acessado em: 10 abril, 2020.
COOPER, D.; PATEL, P. C. The harder they fall, the faster they rise: approach and avoidance focus in narcissistic CEOs. Strategic Management Journal, v. 35 n.10, p. 1528-1540, 2014.
DOYLE, J.; GE, W.; MCVAY, S. Determinants ofweaknesses in internal control over financial reporting. Journal of Accounting and Economics, v. 4, n. 1-2, p. 193-223, 2007.
DULLEMAN, S.; HURWITZ, H.; SUN, Y. Managerial overconfidence and audit fees. Journal of Contemporary Accounting and Economics, v. 11, n. 2, p. 148-165, 2015.
FELIX, W.L.; JR. GRAMLING, A. A.; MALETTA, M. J. The contribution of internal audit as a determinant of external audit fees and factors influencing this contribution. Journal of Accounting Research, v. 39, n. 3, p. 513-534, 2001.
GOTTI, G.; HAN, S.; HIGGS, J. L.; KANG, T. Managerial ownership, corporate monitoring and audit fee. Journal of Accounting, Auditing & Finance, v. 27, n. 3, p. 412-437, 2011.
HALLAK, R. T.; SILVA, A. L. Determinantes das despesas com serviços de auditoria e consultoria prestados pelo auditor independente no Brasil. Revista Contabilidade & Finanças, v. 23, n. 60, p. 223-231, 2012.
HAM, C.; SEYBERT, N.; WANG, S. Narcissism is a bad sign: CEO signature size, investment, and performance. Review of Accounting Studies, v. 23, n. 1, p. 234-264, 2017.
HAMBRICK, D. C. Upper echelons theory: an update. Academy of Management Review, v. 32, n. 2, p. 334-343, 2007.
HAMBRICK, D. C.; MASON, P. A. Upper echelons: the organization as a reflection of its top managers. The Academy of Management Review, v. 9, n. 2, p. 193-206,1984.
HAN, S., KANG, T., & REES, L. The association between institutional ownership and audit properties. Asia-Pacific Journal of Accounting & Economics, v. 20, n. 2, p. 199-222, 2013.
HASSAN, Y. M., & NASER, K. Determinants of audit fees: evidence from an emerging economy. International Business Research, v. 6, n. 8, p.13, 2013.
HAY, D.; KNECHEL, W.; WONG, N. Audit fees: a meta-analysis of the effect of supply and demand attributes. Contemporary Accounting Research, v. 23, n. 1, p. 141-191, 2006.
HUDAIB, M.; HANIFFA, R.; ZAMAN, M. Corporate governance quality, audit fees and non-audit services fees. Journal of Business Finance Finance & Accounting, v. 38, n. 1/2, p. 165-197, 2011.
JUDD, J. S.; OLSEN, K. J.; STEKELBERG, J. How do auditors respond to CEO narcissism? Evidence from external audit fees. Accounting Horizons, v. 31, n. 4, p. 33-52, 2017.
KASHMIRI, S.; NICOL, C.; ARORA, S. Me, myself, and I: Influence of CEO narcissism on firms' innovation strategy and the likelihood of product-harm crises. Journal of the Academy of Marketing Science, v. 45, p. 633-656, 2017.
KAVESKI, I. D.; CUNHA, P. R. Fatores determinantes dos honorários da auditoria das empresas listadas no Novo Mercado da BM&FBovespa. Contabilidade, Gestão e Governança, v. 19, n. 1, p. 49-63, 2016.
LAUCK, J. R.; RAKESTRAW, J. R.; STEIN, S. E. Do audit fees reflect unique characteristics of individual executives? Accounting Horizons (forthcoming), de 14 de maio de 2020. Disponível em: http://dx.doi.org/10.2139/ssrn.2639777. Acessado em: 20 de agosto, 2020.
LOPES, I. M.; MARQUES, V. A.; LOUZADA, L. C. Deficiências dos controles internos das empresas listadas na B3. Revista Evidenciação Contábil & Finanças, v. 7, n. 3, p. 105-126, set./dez, 2019.
MAYORAL, J. M.; SEGURA, A. S. Un estudio empírico de los honorarios del auditor. Cuadernos de Economía y Dirección de la Empresa, v. 10, n. 32, p. 81-109, 2007.
MUNSIF, V.; RAGHUNANDAN, K.; RAMA, D. V.; SINGHVI, M. Audit fees after remediation of internal control weaknesses. Accounting Horizons, v. 25, n. 1, p. 87-105, 2011.
NARDI, P. C. C.; ORSI, L. E.; BORGES, V. P.; SILVA, R. L. M. Influência de Práticas Contábeis Discricionárias no Honorário de Auditoria. Enfoque Reflexão Contábil, v. 37, n. 3, p. 55-72, 2018.
NASER, K.; NUSEIBEH, R. Determinants of audit fees: empirical evidence from an emerging economy. International Journal of Commerce and Management, v. 17, n. 3, p. 239-254, 2008.
OLSEN, K. J.; DWORKIS, K. K.; YOUNG, S. M. CEO narcissism and accounting: a picture of profits. Journal of Management Accounting Research, v. 26, n. 2, p. 243-267, 2014.
OLSEN, K. J.; STEKELBERG, J. CEO narcissism and corporate tax sheltering. The Journal of the American Taxation Association, v. 38, n. 1, p. 1-22, 2016.
O'REILLY, C. A.; DOERR, B.; CHATMAN, J. A. “See you in court”: how CEO narcissism increases firms’ vulnerability to lawsuits. Leadership Quarterly, v. 29, n. 3, p. 365-378, 2018.
PARK, S. W.; COLVIN, C. R. Narcissism and discrepancy between self and friends' perceptions of personality. Journal of Personality, v. 82, n. 4, p. 278-286, 2014.
PAULHUS, D. L. Interpersonal and intrapsychic adaptiveness of trait self-enhancement: a mixed blessing? Journal of Personality & Social Psychology, v. 74, n. 5, p. 1197-1208, 1998.
PRADO, P. H.; KORELO, J. C.; SILVA, D. M. Análise de mediação, moderação e processos condicionais. Revista Brasileira de Marketing – ReMark, v. 13 (Edição Especial), p. 4-24, set, 2014.
RAGHUNANDAN, K.; RAMA, D. V. SOX section 404 material weakness disclosures and audit fees. A Journal of Practice & Theory, v. 25, n. 1, p. 99-114, 2006.
SHROUT, P. E.; BOLGER, N. Mediation in experimental and nonexperimental studies: new procedures and recommendations. Psychological, v. 7, n. 4, p. 422-445, 2002.
SIMUNIC, D. A. The pricing of audit services: theory and evidence University of Chicago. Journal of Accounting Research, v. 18, n. 1, p. 161-190, 1980.
SOUZA, P. V.; CARDOSO, R. L.; VIEIRA, S. S. Determinantes da remuneração dos executivos e sua relação com o desempenho financeiro das companhias. REAd – Revista Eletrônica de Administração, v. 23 (Nº Especial), p. 4-28, 2017.
TRACY, J. L.; CHENG, J. T.; ROBINS, R. W.; TRZESNIEWSKI, K. H. Authentic and hubristic pride: the affective core of self-esteem and narcissism. Self & Identity, v. 8, n. 2/3, p. 196-213, 2009.
WYSOCKI, P. Corporate compensation policies and audit fees. Journal of Accounting and Economics, v. 49, n. 1-2, p. 155-160, 2010.
APOSTOLOU, B. A.; HASSELL, J. M.; JOHNSON, E. N.; J. R. KUHN, J. Auditor perceptions of client narcissism as a fraud attitude risk factor. A Journal of Practice & Theory, v. 32, n. 1, p. 203-219, 2013.
ÁVILA, J. R.; COSTA, P. D.; FÁVERO, L. P. Honorários de auditoria e book-tax differences. Revista de Contabilidade e Organizações, v. 11, n. 31, p. 31-46, 2017.
BACK, M. D.; SCHMUKLE, S. C.; EGLOFF, B. Why are narcissists so charming at first sight? Decoding the narcissism-popularity link at zero acquaintance. Journal of Personality and Social Psychology, v. 95, n. 1, p. 132-145, 2010.
BARON, R. M.; KENNY, D. A.. The moderator-mediator variable distinction in social psychological research: conceptual, strategic and statistical considerations. Journal of Personality and Social Psychology, v. 51, n. 6, p. 1173-1182, 1986.
BRIGHENTI, J.; DEGENHART, L.; CUNHA, P. R.. Fatores influentes nos honorários de auditoria: análise das empresas brasileiras listadas na BM&FBovespa. Pensar Contábil, v. 18, n.65, p.16-27, jan./abr. 2016).
BUYL, T.; BOONE, C.; WADE, J. B. CEO Narcissism, risk-taking, and resilience: An empirical analysis in US commercial banks. Journal of Management, v. 45, n. 4, p. 1372-1400, 2017.
CAMPBELL, W. K.; HOFFMAN, B. J.; CAMPBELL, S. M.; MARCHISIO, G. Narcissism in organizational contexts. Human Resource Management Review, v. 21,n. 4, p.268-284, 2011.
CARLSON, E. N.; VAZIRE, S.; OLTMANNS, T. F. You probably think this paper's about you: narcissists' perceptions of their personality and reputation. Journal of Personality and Social Psychology, v.101, n. 1, p. 185-201, 2011.
CARMO, C. H.; RIBEIRO, A. M.; CARVALHO, L. N. Convergência de fato ou de direito? A influência do sistema jurídico na aceitação das normas internacionais para pequenas e médias empresas. Revista Contabilidade & Finanças, v. 22, n. 57, p. 242-262, 2011.
CARPENTER, M. A.; GELETKANYCZ, M. A.; SANDERS, W. G. Upper echelons echelons research revisited: antecedents, elements, and consequences of top management team composition. Journal of Management, v. 30 n. 6, p. 749-778, 2004.
CASTRO, W. B.; PELEIAS, I. R.; SILVA, G. P. Determinantes dos honorários de auditoria: um estudo nas empresas listadas na BM&FBovespa, Brasil. Revista Contabilidade & Finanças, v. 26, n.69, p. 261-273, 2015.
CHATTERJEE, A.; HAMBRICK, D. C. It’s all about me: narcissistic chief executive officers and their effects on company strategy and. Administrative Science Quarterly, v. 52, n. 3, p. 351-386, 2007.
CHENG, M.; DHALIWAL, D.; ZHANG, Y.. Does investment efficiency improve after the disclosure ofmaterial weaknesses in internal control over financial reporting? Journal of Accounting and Economics, v. 56, n. 1, p. 1-18, 2013.
CFC. Conselho Federal Contabilidade. NBC TA 70 - Comunicação dos principais assuntos de auditoria no relatório do auditor independente, de 04 de julho de 2016. 2019, disponível em: https://cfc.org.br/tecnica/normas-brasileiras-de-contabilidade/. Acessado em: 10 abril, 2020.
COOPER, D.; PATEL, P. C. The harder they fall, the faster they rise: approach and avoidance focus in narcissistic CEOs. Strategic Management Journal, v. 35 n.10, p. 1528-1540, 2014.
DOYLE, J.; GE, W.; MCVAY, S. Determinants ofweaknesses in internal control over financial reporting. Journal of Accounting and Economics, v. 4, n. 1-2, p. 193-223, 2007.
DULLEMAN, S.; HURWITZ, H.; SUN, Y. Managerial overconfidence and audit fees. Journal of Contemporary Accounting and Economics, v. 11, n. 2, p. 148-165, 2015.
FELIX, W.L.; JR. GRAMLING, A. A.; MALETTA, M. J. The contribution of internal audit as a determinant of external audit fees and factors influencing this contribution. Journal of Accounting Research, v. 39, n. 3, p. 513-534, 2001.
GOTTI, G.; HAN, S.; HIGGS, J. L.; KANG, T. Managerial ownership, corporate monitoring and audit fee. Journal of Accounting, Auditing & Finance, v. 27, n. 3, p. 412-437, 2011.
HALLAK, R. T.; SILVA, A. L. Determinantes das despesas com serviços de auditoria e consultoria prestados pelo auditor independente no Brasil. Revista Contabilidade & Finanças, v. 23, n. 60, p. 223-231, 2012.
HAM, C.; SEYBERT, N.; WANG, S. Narcissism is a bad sign: CEO signature size, investment, and performance. Review of Accounting Studies, v. 23, n. 1, p. 234-264, 2017.
HAMBRICK, D. C. Upper echelons theory: an update. Academy of Management Review, v. 32, n. 2, p. 334-343, 2007.
HAMBRICK, D. C.; MASON, P. A. Upper echelons: the organization as a reflection of its top managers. The Academy of Management Review, v. 9, n. 2, p. 193-206,1984.
HAN, S., KANG, T., & REES, L. The association between institutional ownership and audit properties. Asia-Pacific Journal of Accounting & Economics, v. 20, n. 2, p. 199-222, 2013.
HASSAN, Y. M., & NASER, K. Determinants of audit fees: evidence from an emerging economy. International Business Research, v. 6, n. 8, p.13, 2013.
HAY, D.; KNECHEL, W.; WONG, N. Audit fees: a meta-analysis of the effect of supply and demand attributes. Contemporary Accounting Research, v. 23, n. 1, p. 141-191, 2006.
HUDAIB, M.; HANIFFA, R.; ZAMAN, M. Corporate governance quality, audit fees and non-audit services fees. Journal of Business Finance Finance & Accounting, v. 38, n. 1/2, p. 165-197, 2011.
JUDD, J. S.; OLSEN, K. J.; STEKELBERG, J. How do auditors respond to CEO narcissism? Evidence from external audit fees. Accounting Horizons, v. 31, n. 4, p. 33-52, 2017.
KASHMIRI, S.; NICOL, C.; ARORA, S. Me, myself, and I: Influence of CEO narcissism on firms' innovation strategy and the likelihood of product-harm crises. Journal of the Academy of Marketing Science, v. 45, p. 633-656, 2017.
KAVESKI, I. D.; CUNHA, P. R. Fatores determinantes dos honorários da auditoria das empresas listadas no Novo Mercado da BM&FBovespa. Contabilidade, Gestão e Governança, v. 19, n. 1, p. 49-63, 2016.
LAUCK, J. R.; RAKESTRAW, J. R.; STEIN, S. E. Do audit fees reflect unique characteristics of individual executives? Accounting Horizons (forthcoming), de 14 de maio de 2020. Disponível em: http://dx.doi.org/10.2139/ssrn.2639777. Acessado em: 20 de agosto, 2020.
LOPES, I. M.; MARQUES, V. A.; LOUZADA, L. C. Deficiências dos controles internos das empresas listadas na B3. Revista Evidenciação Contábil & Finanças, v. 7, n. 3, p. 105-126, set./dez, 2019.
MAYORAL, J. M.; SEGURA, A. S. Un estudio empírico de los honorarios del auditor. Cuadernos de Economía y Dirección de la Empresa, v. 10, n. 32, p. 81-109, 2007.
MUNSIF, V.; RAGHUNANDAN, K.; RAMA, D. V.; SINGHVI, M. Audit fees after remediation of internal control weaknesses. Accounting Horizons, v. 25, n. 1, p. 87-105, 2011.
NARDI, P. C. C.; ORSI, L. E.; BORGES, V. P.; SILVA, R. L. M. Influência de Práticas Contábeis Discricionárias no Honorário de Auditoria. Enfoque Reflexão Contábil, v. 37, n. 3, p. 55-72, 2018.
NASER, K.; NUSEIBEH, R. Determinants of audit fees: empirical evidence from an emerging economy. International Journal of Commerce and Management, v. 17, n. 3, p. 239-254, 2008.
OLSEN, K. J.; DWORKIS, K. K.; YOUNG, S. M. CEO narcissism and accounting: a picture of profits. Journal of Management Accounting Research, v. 26, n. 2, p. 243-267, 2014.
OLSEN, K. J.; STEKELBERG, J. CEO narcissism and corporate tax sheltering. The Journal of the American Taxation Association, v. 38, n. 1, p. 1-22, 2016.
O'REILLY, C. A.; DOERR, B.; CHATMAN, J. A. “See you in court”: how CEO narcissism increases firms’ vulnerability to lawsuits. Leadership Quarterly, v. 29, n. 3, p. 365-378, 2018.
PARK, S. W.; COLVIN, C. R. Narcissism and discrepancy between self and friends' perceptions of personality. Journal of Personality, v. 82, n. 4, p. 278-286, 2014.
PAULHUS, D. L. Interpersonal and intrapsychic adaptiveness of trait self-enhancement: a mixed blessing? Journal of Personality & Social Psychology, v. 74, n. 5, p. 1197-1208, 1998.
PRADO, P. H.; KORELO, J. C.; SILVA, D. M. Análise de mediação, moderação e processos condicionais. Revista Brasileira de Marketing – ReMark, v. 13 (Edição Especial), p. 4-24, set, 2014.
RAGHUNANDAN, K.; RAMA, D. V. SOX section 404 material weakness disclosures and audit fees. A Journal of Practice & Theory, v. 25, n. 1, p. 99-114, 2006.
SHROUT, P. E.; BOLGER, N. Mediation in experimental and nonexperimental studies: new procedures and recommendations. Psychological, v. 7, n. 4, p. 422-445, 2002.
SIMUNIC, D. A. The pricing of audit services: theory and evidence University of Chicago. Journal of Accounting Research, v. 18, n. 1, p. 161-190, 1980.
SOUZA, P. V.; CARDOSO, R. L.; VIEIRA, S. S. Determinantes da remuneração dos executivos e sua relação com o desempenho financeiro das companhias. REAd – Revista Eletrônica de Administração, v. 23 (Nº Especial), p. 4-28, 2017.
TRACY, J. L.; CHENG, J. T.; ROBINS, R. W.; TRZESNIEWSKI, K. H. Authentic and hubristic pride: the affective core of self-esteem and narcissism. Self & Identity, v. 8, n. 2/3, p. 196-213, 2009.
WYSOCKI, P. Corporate compensation policies and audit fees. Journal of Accounting and Economics, v. 49, n. 1-2, p. 155-160, 2010.
Published
2023-07-25
How to Cite
Nunes da Costa Lima, J. E., De Luca, M. M. M., Augusto Sampaio Franco de Lima, G., & Carvalho de Vasconcelos, A. (2023). Association between CEO narcissism and audit fees. Enfoque: Reflexão Contábil, 42(2), 89-105. https://doi.org/10.4025/enfoque.v42i2.59421
Section
Original Articles
DECLARATION OF ORIGINALITY AND COPYRIGHTS
I Declare that current article is original and has not been submitted for publication, in part or in whole, to any other national or international journal.
The copyrights belong exclusively to the authors. Published content is licensed under Creative Commons Attribution 3.0 (CC BY 3.0) guidelines, which allows sharing (copy and distribution of the material in any medium or format) and adaptation (remix, transform, and build upon the material) for any purpose, even commercially, under the terms of attribution.
Read this link for further information on how to use CC BY 3.0 properly.
