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Wealth effect of auditor switch during crisis and non-crisis period : the Malaysian experience

journal contribution
posted on 2006-02-01, 00:00 authored by S Ismail, A Nasir, Huson Ali Ahmed, M Hamid
This study examines the auditor switch effect on share prices among listed companies in Malaysia, mainly the Second Board companies during economic crisis and the economic growth period. Data on companies listed on the KLSE that reported switching of auditors were gathered from the respective companies’ annual reports for the period of 1990 until 1999. Daily stock prices and the Second Board Index for an interval of 200 days windows were extracted from the KLSE Daily Dairy. The wealth effect of auditor’s switch was investigated using the market model event study methodology. The general findings of the study imply that it is consistent with the theory, the market reacts positively to news involving switching to higher prestige audit firms before the economic crisis but reacted negatively during the economic crisis. News involving switching to lower prestige auditors received negative reaction both before and during the crisis. This study postulate that the negative reaction to switches during the economic crisis (either to higher prestige or to lower prestige auditors) may be due to cost cutting exercise rather than obtaining qualified audit reports.

History

Journal

European journal of social science

Volume

3

Issue

2

Pagination

124 - 134

Publisher

European Journals, Inc.

Location

[London, England]

ISSN

1450-2267

Language

eng

Notes

This article is located on the 130th page in the attached link.

Publication classification

C1.1 Refereed article in a scholarly journal

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