Former CEO Director and Audit Fees

This study investigates the relationship between former chief executive officer (CEO) directors and audit pricing. We find that the former CEO directors negatively impact the company’s audit fees. The results do not change after conducting a series of robustness tests. Former CEO directors reduce the company’s operating risk, improve the company’s earnings quality, and reduce the company’s audit fees. Meanwhile, they are more effective at monitoring in companies with less analyst following, lower proportion of female directors, and non-family firms, thus reducing audit fees. Further evidence shows that larger auditors are more likely to reduce audit fees for their clients that have former CEOs retained on the board of directors.