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The impact of mandatory versus voluntary auditor switches on stock liquidity: some Korean evidence

Version 2 2024-06-04, 06:51
Version 1 2015-11-26, 10:34
journal contribution
posted on 2024-06-04, 06:51 authored by S Choi, YS Choi, Ferdinand GulFerdinand Gul, WJ Lee
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.

History

Journal

British accounting review

Volume

47

Pagination

100-116

Location

Amsterdam, The Netherlands

ISSN

1095-8347

eISSN

1095-8347

Language

eng

Publication classification

C1.1 Refereed article in a scholarly journal, C Journal article

Copyright notice

2014, Elsevier

Issue

1

Publisher

Elsevier