Final published version
Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - The impact of mandatory versus voluntary auditor switches on stock liquidity in the Korean market
AU - Choi, Sunhwa
AU - Choi, Youn-Sik
AU - Gul, Ferdinand
AU - Lee, Woo-jong
PY - 2015/3
Y1 - 2015/3
N2 - Using Korean listed firms subject to the auditor “designation rule”, this paper shows that (1) firms that switch auditors exhibit lower stock liquidity than firms that do not switch auditors, and (2) the negative liquidity effect of auditor switches is concentrated in firms that switch to low-quality auditors. Meanwhile, firms that switch auditors under the auditor designation system do not exhibit lower stock liquidity, consistent with audit designation mitigating the concerns about audit quality deterioration around auditor changes. Furthermore, we find that foreign ownership has a mitigating impact on the negative relation between auditor switches and stock liquidity, suggesting that investors are less concerned about auditor switches when an alternative monitoring mechanism exists.
AB - Using Korean listed firms subject to the auditor “designation rule”, this paper shows that (1) firms that switch auditors exhibit lower stock liquidity than firms that do not switch auditors, and (2) the negative liquidity effect of auditor switches is concentrated in firms that switch to low-quality auditors. Meanwhile, firms that switch auditors under the auditor designation system do not exhibit lower stock liquidity, consistent with audit designation mitigating the concerns about audit quality deterioration around auditor changes. Furthermore, we find that foreign ownership has a mitigating impact on the negative relation between auditor switches and stock liquidity, suggesting that investors are less concerned about auditor switches when an alternative monitoring mechanism exists.
KW - Auditor switching
KW - Stock liquidity
KW - Auditor designation
KW - Foreign ownership
U2 - 10.1016/j.bar.2014.08.001
DO - 10.1016/j.bar.2014.08.001
M3 - Journal article
VL - 47
SP - 100
EP - 116
JO - British Accounting Review
JF - British Accounting Review
SN - 0890-8389
IS - 1
ER -