Abstract:
Purpose: This study examines the firm's characteristics and the corporate
governance factors that influence the auditor change decisions, and observes the
market reaction following the announcement of such decisions.
Design/methodology/approach: The relation between the firm's characteristics and
the corporate governance factors with the auditor change decision is addressed using
a logistic regression. The market reaction to the auditor change announcement is
tested using the event study methodology.
Findings: The results show that the company's size is positively related to the
auditor change decision and especially to the choice of a big 4. The executive board
members gender diversity, the board independence and the board members
compensations are found to be negatively related to the auditor choice decision.
Furthermore, a positive market reaction to the switch to a big 4 has been detected,
one day after the auditor change announcement.
Research limitations: The relation between the ownership structure and the auditor
change decision is not addressed in this thesis due to data unavailability.
Furthermore, the majority of the companies in the sample are those changing to big 4
auditors, and consequently the analysis excluded the non-big 4 successor cases.
Practical implications: By revealing the hidden intentions behind the auditor
changes, the tax authorities, the creditors and the shareholders will be able to take
more accurate decisions concerning their stake in the companies engaging in such
changes. Furthermore, the regulatory bodies will be aware of the audit industry
problems that need to be resolved.
Originality/value: First, The UK market is a new context for this type of research.
Second, in the presence of outdated studies tackling the market reaction following
the auditor change announcements, a contemporary study is needed. Third, this thesis
has examined three board factors that no previous studies have tackled.
Description:
M.S. -- Faculty of Business Administration and Economics, Notre Dame University; "A thesis presented in partial fulfillment of the requirements for the degree of the Master of Science in Business Strategy"; Louaize, 2018; Includes bibliographical references (leaves 151-163).