This study uses audit fee data from the 2001–2003 reporting periods to examine the relationship between measures of audit committee effectiveness and compensation incentives with corporate audit fees. Our results suggest that audit committee size, committee member expertise, and committee member independence are positively associated to audit fee levels, consistent with the notion that audit committees serve as a complement to external auditors in monitoring management. In contrast, CEO long-term pay and insider ownership are inversely related to audit fee levels, substituting for external audit effort in motivating management. Notwithstanding results on the full sample of firm-years, we uncover significant differences in the determinants of audit fees between the years examined. An important implication of these results is that explaining the intra-firm variation in audit fees over time is clearly necessary in order to understand the antecedents and consequences of audit fees. Copyright Springer Science+Business Media, LLC 2007Audit committees, Executive compensation, Audit fees,

This study examines the association between long-term performance plans and wealth effects accruing to stockholders of divesting firms at announcements of sell-off proposals. The results indicate that divesting companies with long-term performance plans experience a more favorable stock market reaction at the announcement of sell-off proposals relative to firms without long-term performance plans. The findings imply that long-term performance plans serve as an effective mechanism to motivate managers to make better decisions. SUBSTANTIAL RESEARCH HAS BEEN undertaken on restructuring corporate assets,liabilities, and ownership of publicly traded corporations. With regard to asset restructuring, most of the literature analyzes mergers and tender offers, but, recently, attention has been given to divesting activities.Divestiture is a modification of the firm's productive assets and comes in the form of sell-offs or spin-offs. In sell-offs, the parent company sells part of its assets for cash, assets, or securities of the acquiring firm. Spin-offs involve transfers of assets to a newly organized firm whose shares are distributed to stockholders of the parent firm or involve the distribution of shares of a subsidiary to the parent firm's shareholders. While recent studies1 provide evidence that spin-off announcements are associated with significant positive abnormal returns to parent firms around the day of the event, the studies on voluntary sell-offs report mixed results.2 These results raise questions about management's motivation to sell part of the firm's assets.Prior research assumes that corporate sell-offs are activities consistent with stockholders' interests. However, sell-offs can be motivated by managerial selfinterest, particularly when sell-offs increase reported profits and, hence, management compensation. Recent articles in the financial press3 suggest that firms * Tehranian and Travlos are from the Department of Finance, Boston College. Waegelein is from the Department of Accounting, University of Kansas. The authors thank Thomas Downs, Marcia Millon, George Papaioannou, John G. Preston, Jerry Viscione, and an anonymous referee for their helpful comments. ' See Miles and Rosenfeld [16], Hite and Owers [8], and Schipper and Smith [20]. 2 Rosenfeld [19], Jain [11], and Hite, Owers, and Rogers [9] report that sell-off announcements produce significant positive abnormal returns on the announcement day(s). However, Alexander, Benson, and Kampmeyer [1] report that sell-off announcements produce insignificant positive excess returns during the announcement period and insignificant negative excess returns for the thirty-day period immediately after the announcement period. 933 936 The Journal of Finance II. Data and Methodology A. Data Data analyzed in this study consist of a sample of public announcements of proposals to sell a portion of the firm's assets. The sample includes transactions for the period 1974 through 1982. Divesting firms are listed on the New York Stock Exchange (NYSE) or the American Stock...

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