Effects of Audit Quality on Earnings Management and Cost of Equity Capital: Evidence from India

2011 ◽  
Author(s):  
Muhammad Nurul Houqe ◽  
Kamran Ahmed ◽  
Tony van Zijl
Keyword(s):  
Earnings Management ◽  
Audit Quality ◽  
Equity Capital ◽  
Cost Of Equity Capital ◽  
Cost Of Equity

scholarly journals ANALISIS PENGARUH KUALITAS AUDIT TERHADAP MANAJEMEN LABA DAN COST OF EQUITY CAPITAL: STUDI PENDEKATAN COMPOSITE MEASURE

2017 ◽  
Vol 13 (2) ◽  
pp. 95
Author(s):  
Shelni Yuvita ◽  
Deni Darmawati
Keyword(s):  
Regression Analysis ◽  
Earnings Management ◽  
Audit Quality ◽  
Manufacturing Firms ◽  
Equity Capital ◽  
The Other ◽  
Composite Measure ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
The Cost

<p>The purpose of this study is to observe the effect of audit quality on earnings<br />management and cost of equity capital. Audit quality is measured by the<br />composite measure (variable AQMS), earnings management is measured by<br />the modified Jones model, the cost of equity capital is measured with a modified<br />Ohlson models with random walk. This study uses manufacturing firms for<br />samples during 2010-2012 by using purposive sampling and regression analysis<br />for analyst the data. The results showed that audit quality has a significant<br />effect on earnings management and cost of equity capital, while for the control<br />variables size and leverage, only leverage which has significant effect to cost of<br />equity capital, and the other has no significant effect on earnings management<br />and cost of equity capital.<br />Keywords: Audit Quality, earnings management, cost of equity capital,<br />composite measure</p>

Audit Quality, Earnings Management, and Cost of Equity Capital: Evidence from India

2017 ◽  
Vol 21 (2) ◽  
pp. 177-189 ◽  
Author(s):  
Muhammad Nurul Houqe ◽  
Kamran Ahmed ◽  
Tony van Zijl
Keyword(s):  
Earnings Management ◽  
Audit Quality ◽  
Equity Capital ◽  
Cost Of Equity Capital ◽  
Cost Of Equity

The impact of audit quality on earnings management and cost of equity capital: evidence from a developing market

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ben Le ◽  
Paula Hearn Moore
Keyword(s):  
Financial Reporting ◽  
Audit Quality ◽  
Discretionary Accruals ◽  
Equity Capital ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Content Type ◽  
Big 4 ◽  
The Government ◽  
The Impact

Purpose This study aims to examine the effects of audit quality on earnings management and cost of equity capital (COE) considering the impact of two owner types: government ownership and foreign ownership. Design/methodology/approach The study uses a panel data set of 236 Vietnamese firms covering the period 2007 to 2017. Because the two main dependent variables of the COE capital and the absolute value of discretionary accruals receive fractional values between zero and one, the paper uses the generalised linear model (GLM) with a logit link and the binomial family in regression analyses. The paper uses numerous audit quality measures, including hiring Big 4 auditors or the industry-leading Big 4 auditor, changing from non-Big 4 auditors to Big 4 auditors or the industry-leading Big 4 auditor, and the length of Big 4 auditor tenure. Big 4 companies include KPMG, Deloitte, EY and PwC, whereas the non-big 4 are the other audit companies. Findings The study finds a negative relationship between audit quality and both the COE capital and income-increasing discretionary accruals. The effects of audit quality on discretionary accruals and the COE capital depend on the ownership levels of two important shareholders: the government and foreign investors. Foreign ownership is negatively associated with discretionary accruals; however, the effect is more pronounced in the sub-sample of state-owned enterprises (SOEs), the firms where the government owns 50% or more equity, than in the sub-sample of Non-SOEs. Originality/value To the best of the knowledge, no prior similar study exists that used the GLM with a logit link and the binomial family regression. Global investors may be interested in understanding how unique institutional settings and capital markets of each country impact the financial reporting quality and cost of capital. Further, policymakers of developing markets may have incentives to improve the quality of financial reporting and reduce the cost of capital which should result in attracting more foreign investments.

scholarly journals Cost Adjustment in the Korean Defense Industry: Empirical Research on the Relation between Earnings Management and Sustainability

2019 ◽  
Vol 11 (5) ◽  
pp. 1481 ◽  
Author(s):  
Sangkyun Sohn ◽  
Joonho Park ◽  
Jinseek Lee
Keyword(s):  
Earnings Management ◽  
Indirect Costs ◽  
Defense Industry ◽  
Equity Capital ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Cost System ◽  
The Difference ◽  
Integrated Cost ◽  
The Cost

This article is a demonstrative research on the motivation and method for earnings management in the Korean defense industry and its connection with the cost of equity capital. The data for this article comes from the Korean DICS (Defense Integrated Cost System). The difference between the cost data submitted by defense corporations and those verified by DAPA (Defense Acquisition Program Administration) serves as an indicator of earnings management; such a direct measurement of earnings management distinguishes this research from previous studies focusing on indirect indicators of earnings management, such as discretionary accruals. This article purposefully names such a specific form of earnings management as ‘cost adjustment’ that takes advantage of the difference between the submitted cost and the verified cost. The result of the research shows that cost adjustment activities in the defense industry are proportional to the capital cost required by shareholders. It is also notable that the cost adjustment activities in the defense industry are mostly done by making use of direct costs, in contrast to other industries utilizing indirect costs, which are hardly traceable. As a result of cost adjustment to meet short-term target profit, the long-term sustainability of the company would get impaired from the inflated costs in direct cost adjustments.

scholarly journals PENGARUH ASIMETRI INFORMASI DAN MANAJEMEN LABATERHADAP BIAYA MODAL EKUITAS PADA PERUSAHAAN MANUFAKTUR YANG TERDAFTAR DI BURSA EFEK INDONESIA (BEI) TAHUN 2013-2015

2018 ◽  
Vol 6 (1) ◽  
Author(s):  
Yudi Partama Putra
Keyword(s):  
Earnings Management ◽  
Information Asymmetry ◽  
Stock Exchange ◽  
Equity Capital ◽  
Manufacturing Companies ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Capital Costs ◽  
The Cost ◽  
Variable Information

Yudi Partama Putra; This study aims to (1) determine the effect of asymmetry of information on costs of equity at manufacturing companies listed in Indonesia Stock Exchange period 2013-2015, (2) know the effect of earnings management on equity capital costs at manufacturing companies listed on the Stock Exchange in 2013- 2015, (3) determine the effect of information asymmetry and earnings management simultaneously on the cost of equity capital in manufacturing companies listed on the Indonesian Stock Exchange 2013-2015. The population in this study is manufacturing company listed on the Indonesia Stock Exchange. While the sample selection is taken by using purposive sampling method. The classical assumption test used in this research is using normality test, multicollinearity test, heteroscedasticity test, and autocorrelation test. Analysis of data used to test the hypothesis is multiple linear regression analysis techniques. Based on the results of the research indicate that (1) information asymmetry has positive and significant effect to cost of equity (2) earnings management has no significant effect on Cost of equity. F test results show that the variable information asymmetry and earnings management simultaneously affect the cost of equity capital. The result of determination coefficient test with R square shows that variable information asymmetry and earnings management influence cost equity capital equal 10,7%, while the rest 89,3% influenced by other variables.Key Words: Information Asymetry, Earnings Management, and Cost Of Equity.

Audit Quality, Accounting Attributes and the Cost of Equity Capital

2009 ◽  
Author(s):  
Yang Li ◽  
Donald J. Stokes ◽  
Stephen L. Taylor ◽  
Leon Wong
Keyword(s):  
Audit Quality ◽  
Equity Capital ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
The Cost

Can Big 4 versus Non-Big 4 Differences in Audit-Quality Proxies Be Attributed to Client Characteristics?

2011 ◽  
Vol 86 (1) ◽  
pp. 259-286 ◽  
Author(s):  
Alastair Lawrence ◽  
Miguel Minutti-Meza ◽  
Ping Zhang
Keyword(s):  
Audit Quality ◽  
Forecast Accuracy ◽  
Equity Capital ◽  
Analyst Forecast ◽  
Cost Of Equity Capital ◽  
Cost Of Equity ◽  
Client Characteristics ◽  
Big 4 ◽  
Audit Firms ◽  
Matching Models

ABSTRACT: This study examines whether differences in proxies for audit quality between Big 4 and non-Big 4 audit firms could be a reflection of their respective clients’ characteristics. In our analyses, we use three audit-quality proxies—discretionary accruals, the ex ante cost-of-equity capital, and analyst forecast accuracy—and employ propensity-score and attribute-based matching models in attempt to control for differences in client characteristics between the two auditor groups while estimating the audit-quality effects. Using these matching models, we find that the effects of Big 4 auditors are insignificantly different from those of non-Big 4 auditors with respect to the three audit-quality proxies. Our results suggest that differences in these proxies between Big 4 and non-Big 4 auditors largely reflect client characteristics and, more specifically, client size. We caution the reader that this study has not resolved the question, although we hope that it encourages other researchers to explore alternative methodologies that separate client characteristics from audit-quality effects.

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