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Stock Liquidity, Auditor Choice, and Audit Fees.

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Title:Stock Liquidity, Auditor Choice, and Audit Fees.
Authors:Qin, Juan
Contributors:Business Administration (department)
Keywords:Stock Liquidity
Auditor Choice
Audit Fees
Corporate Governance
Institutional Monitoring
Date Issued:Aug 2017
Publisher:University of Hawaiʻi at Mānoa
Abstract:I investigate whether firms’ stock liquidity is associated with their auditor choices and
audit fees. Stock liquidity can increase monitoring by helping institutional investors
overcoming free-rider problems to intervene in management decisions. Stock liquidity
can also facilitate block formation and costly information acquisition, which enhances
corporate governance through the threat of exit by institutional investors. Given that
stock liquidity can enhance corporate governance, firms with higher stock liquidity may
have incentives to hire higher quality auditors and pay higher audit fees to satisfy the
demand of institutional investors. Consistent with these arguments, I find that firms with
liquid stocks are more likely to appoint higher quality auditors such as Big 4 and industry
specialist auditors, and they also pay significantly higher audit fees. These results are
robust to alternative measures of liquidity and industry specialists. These results are also
robust to the control of the endogeneity of stock liquidity. This paper contributes to the
accounting literature by providing empirical evidence of the role of stock liquidity on
auditor choice and audit pricing.
Description:Ph.D. Thesis. University of Hawaiʻi at Mānoa 2017.
Rights:All UHM dissertations and theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission from the copyright owner.
Appears in Collections: Ph.D. - Business Administration

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