The Effects of Abnormal Audit Hours and Abnormal Internal Quality Assurance Hours on the Cost of Equity Capital and the Moderating Effect of Audit Firm Size

This study examines the stock liquidity and cost of equity capital (COEC) effects around the CNX Nifty index revisions during the period 1998–2011. To examine these effects, the inclusion (exclusion) firms are compared with their matching peers. The stock liquidity effect has been examined by using distinct liquidity measures, such as trading volume, turnover rate and illiquidity ratio. The COEC effect has been examined with the help of cost of equity, stock liquidity, firm size, leverage and inclusion (exclusion) dummies. It was found that the stocks included to the CNX NIFTY were less liquid than their matching peers were, whereas the stocks excluded were experiencing more liquidity than their matching peers. Further, the study finds an increase in the COEC for the included firms and a decrease in the COEC for the excluded firms.

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How Investors Perceive Mandatory Audit Firm Rotation in Korea

Sustainability ◽

10.3390/su11041089 ◽

2019 ◽

Vol 11 (4) ◽

pp. 1089 ◽

Cited By ~ 2

Author(s):

Sook Kim ◽

Seon Kim ◽

Dong Lee ◽

Seung Yoo

Keyword(s):

Audit Quality ◽

Indirect Evidence ◽

Auditor Independence ◽

Equity Capital ◽

Cost Of Equity Capital ◽

Cost Of Equity ◽

Audit Firm ◽

The Cost ◽

Mandatory Audit Firm Rotation ◽

The Impact

Credible audit quality is a precondition for a firm’s sustainability. External auditors offer assurance with regard to the uncertain factors that can jeopardize a firm’s sustainability and provide audit opinions that help investors assess risk. After the global crisis and accounting scandals, mandatory audit firm rotation has been implemented globally. However, few studies have investigated either the cost or the benefit of mandatory audit firm rotation. Prior studies provide only indirect evidence on the effects of audit firm tenure on audit quality/perceived audit quality. By discussing prior arguments, we examine how investors perceive the implementation of mandatory audit firm rotation in Korea. Using a unique and direct setting to examine our research question, we analyze the relationship between firms with mandatorily switched audit firms and the cost of equity capital from 2006 to 2008. We find that the mandatory change in the auditors has a negative association with the cost of equity capital. The results are robust to using the arithmetic mean of the cost of equity capital, lagged control variables, and the manufacturing industry effect. The results indicate that investors perceive that mandatory audit firm rotation provides an environment for qualified audits by enhancing auditor independence and skepticism, and thus decreases the cost of equity capital. This study helps to improve our understanding of the impact of mandatory audit firm rotation the information risk evaluations and provides political implications for policy makers by showing the benefit of mandatory audit firm rotation.

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The Effect of Intellectual Capital Disclosure, Information Asymmetry, and Firm Size on Cost of Equity Capital with Managerial Ownership as a Moderating Variable

The Indonesian Accounting Review ◽

10.14414/tiar.v8i2.1529 ◽

2018 ◽

Vol 8 (2) ◽

pp. 163

Author(s):

Devita Hendini Putri ◽

Nur'aini Rokhmania

Keyword(s):

Information Asymmetry ◽

Firm Size ◽

Intellectual Capital ◽

Stock Exchange ◽

Equity Capital ◽

Least Square ◽

Managerial Ownership ◽

Cost Of Equity Capital ◽

Cost Of Equity ◽

The Cost

The purpose of this study is to find out the effect of intellectual capital disclosure, information asymmetry, and firm size on cost of equity capital with managerial ownership as moderating variable. Total sample used in this study is 47 companies listed in the LQ45 Index in Indonesia Stock Exchange (IDX) during the period February 2014 - January 2017. The study period was 2013-2016. Data analysis technique used in this study is descriptive statistical analysis, ordinary least square analysis, and moderated regression analysis. The results of this study show that intellectual capital disclosure has an effect on the cost of equity capital. Components of intellectual capital disclosure, such as human capital, structural capital, and relational capital, have a significant effect on the cost of equity capital. But information asymmetry and firm size have no significant effect on the cost of equity capital. Managerial ownership, as moderating variable, cannot moderate the effect of intellectual capital disclosure, information asymmetry, and firm size on the cost of equity capital.

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