The Effects of Auditor Social and Human Capital on Auditor Compensation: Evidence from the Italian Small Audit Firm Market

Pietro Bianchi, Nieves Carrera, Marco Trombetta

Research output: Contribution to journalArticle

Abstract

This study examines whether social and human capital influence the compensation of individual auditors in the small audit firm market. We employ a sample of Italian auditors and use measures from the network and auditing literatures to capture their professional connections, representing social capital, and their industry expertise, representing human capital. Our findings show a positive and economically meaningful association between these individual attributes and auditor compensation. We run several tests to address potential endogeneity issues in our research design. Our results suggest that, in the small audit market, clients perceive as valuable those auditors with higher social and human capital, and as a result, are willing to pay a premium for these specific auditor attributes.

Original languageEnglish (US)
JournalEuropean Accounting Review
DOIs
StateAccepted/In press - Jan 1 2019
Externally publishedYes

Fingerprint

Audit firms
Human and social capital
Auditors
Expertise
Endogeneity
Auditing
Industry
Human capital
Audit market
Premium
Research design
Social capital

Keywords

  • Audit fees
  • Auditor compensation
  • Human capital
  • Small audit firm market
  • Social capital

ASJC Scopus subject areas

  • Accounting

Cite this

@article{b893ea2eef8b49d7958be7da2c80d706,
title = "The Effects of Auditor Social and Human Capital on Auditor Compensation: Evidence from the Italian Small Audit Firm Market",
abstract = "This study examines whether social and human capital influence the compensation of individual auditors in the small audit firm market. We employ a sample of Italian auditors and use measures from the network and auditing literatures to capture their professional connections, representing social capital, and their industry expertise, representing human capital. Our findings show a positive and economically meaningful association between these individual attributes and auditor compensation. We run several tests to address potential endogeneity issues in our research design. Our results suggest that, in the small audit market, clients perceive as valuable those auditors with higher social and human capital, and as a result, are willing to pay a premium for these specific auditor attributes.",
keywords = "Audit fees, Auditor compensation, Human capital, Small audit firm market, Social capital",
author = "Pietro Bianchi and Nieves Carrera and Marco Trombetta",
year = "2019",
month = "1",
day = "1",
doi = "10.1080/09638180.2019.1647258",
language = "English (US)",
journal = "European Accounting Review",
issn = "0963-8180",
publisher = "Routledge",

}

TY - JOUR

T1 - The Effects of Auditor Social and Human Capital on Auditor Compensation

T2 - Evidence from the Italian Small Audit Firm Market

AU - Bianchi, Pietro

AU - Carrera, Nieves

AU - Trombetta, Marco

PY - 2019/1/1

Y1 - 2019/1/1

N2 - This study examines whether social and human capital influence the compensation of individual auditors in the small audit firm market. We employ a sample of Italian auditors and use measures from the network and auditing literatures to capture their professional connections, representing social capital, and their industry expertise, representing human capital. Our findings show a positive and economically meaningful association between these individual attributes and auditor compensation. We run several tests to address potential endogeneity issues in our research design. Our results suggest that, in the small audit market, clients perceive as valuable those auditors with higher social and human capital, and as a result, are willing to pay a premium for these specific auditor attributes.

AB - This study examines whether social and human capital influence the compensation of individual auditors in the small audit firm market. We employ a sample of Italian auditors and use measures from the network and auditing literatures to capture their professional connections, representing social capital, and their industry expertise, representing human capital. Our findings show a positive and economically meaningful association between these individual attributes and auditor compensation. We run several tests to address potential endogeneity issues in our research design. Our results suggest that, in the small audit market, clients perceive as valuable those auditors with higher social and human capital, and as a result, are willing to pay a premium for these specific auditor attributes.

KW - Audit fees

KW - Auditor compensation

KW - Human capital

KW - Small audit firm market

KW - Social capital

UR - http://www.scopus.com/inward/record.url?scp=85070301591&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=85070301591&partnerID=8YFLogxK

U2 - 10.1080/09638180.2019.1647258

DO - 10.1080/09638180.2019.1647258

M3 - Article

AN - SCOPUS:85070301591

JO - European Accounting Review

JF - European Accounting Review

SN - 0963-8180

ER -