The impact of audit quality on stock price of joint stock companies listed on the Vietnamese stock market
Main Article Content
Abstract
The objective of the research is to analyze the impact of audit quality on stock price of joint stock companies listed on the Vietnamese stock market. The reseach sample is 697 joint stock companies listed on the Vietnamese stock market in the period 2020-2022. Using the generalized least squares (FGLS) method, the study has proven that audit quality has a positively significant impact on stock prices with measures of audit firm reputation, audit opinions, premature disclosure of financial statements. However, the research is pointed out that the impact of audit tenure on stock prices is insginificant. These results provides implications for managers regarding the criteria for selecting appropriate auditing firms. Furthermore, the results also show that transparency and quality of financial reporting information plays important role in investors' decisions of company stock
Article Details
Keywords
stock price, audit opinions, audit firm reputation, audit tenure, premature disclosure of financial statements
References
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Chan, K. H., Luo, V. W., and Mo, P. L. L. (2016), “Determinants and implications of long audit reporting lags: evidence from China ”, Accounting and Business Research, vol. 46, no.2, 145-166.
Chaney, P. K., Jeter, D. C., and Shivakumar, L. (2004), “Self-selection of auditors and audit pricing in private firms”, The Accounting Review, vol. 79, no.1, 51-72.
Chen, Q., Goldstein, I., and Jiang, W. (2007), “Price informativeness and investment sensitivity to stock price”, The Review of Financial Studies, vol. 20, no.3, 619-650.
Corbella, S., Florio, C., Gotti, G., and Mastrolia, S. A. (2015), “Audit firm rotation, audit fees, and audit quality: the experience of Italian public companies”, Journal of International Accounting, Auditing & Taxation, vol. 25, no.1, 46-66.
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DeFond, M., and Zhang, J. (2014), “A review of archival auditing research”, Journal of Accounting and Economics, vol. 58, no.2, 275-326.
Dionisijev, I., and Lazarevska, Z. B. (2021), “The audit opinion in the role of stock prices fluctuations on the Macedonian Stock Exchange
”, Financial Studies vol. 3, 29-43.
Durnev, A., R, M., Yeung, B., and Zarowin, P. (2003), “Does greater firm‐specific return variation mean more or less informed stock pricing?”, Journal of Accounting Research, vol. 41, no.5, 797-836.
Fargher, N., Lee, H., and Mande, V. (2008), “The effect of audit partner tenure on client managers accounting discretion”, Managerial Auditing Journal, vol. 23, no.2, 161-186.
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Francis, J. R., and Yu, M. D. (2009), “Big 4 office size and audit quality”, The Accounting Review, vol. 84, no.5, 1521-1552.
Hassan, S. U., and Farouk, M. A. (2014 ), “Audit Quality and Financial Performance of Quoted Cement Firms in Nigeria”, European Journal of Business and Management, vol. 6, 73-82.
Hoti, A., Ismajli, H., Ahmeti, S., and Dermaku, A. (2012), “Effects of Audit Opinion on Stock Price: The case of Croatia and Slovenia
”, EuroEconomica, vol. 31, no.2, 75-87.
Khurana, I. K., and Raman, K. (2004), “Litigation risk and the financial reporting credibility of Big 4 versus non-Big 4 audits: Evidence from Anglo-American countries”, The Accounting Review, vol. 79, no.2, 473-495.
Kim, J. B., Chung, R., and Firth, M. (2003), “Auditor conservatism, asymmetric monitoring, and earnings management”, Contemporary Accounting Research, vol. 20, no.2, 323-359.
Lin, J. W., and Hwang, M. I. (2010), “Audit quality, corporate governance, and earnings management: A meta‐analysis”, International Journal of Auditing, vol. 14, no.1, 57-77.
Mahdi, M., & Khaddafi, M. (2020). "The Influence of Gross Profit Margin, Operating Profit Margin and Net Profit Margin on the Stock Price of Consumer Good Industry in the Indonesia Stock Exchange on 2012-2014", International Journal of Business, Economics and Social Development , 1 (3), 153-163. https://doi.org/10.46336/ijbesd.v1i3.53.
Memis, M. U., and Cetenak, E. H. (2012), “Earnings management, audit quality, and legal environment: An international comparison”, International Journal of Economics and Financial Issues, vol. 2, no.4, 460-469.
Moradi, M., Salehi, M., Rigi, M., and Moeinizade, M. (2011), “The effect of qualified audit report on share prices and returns”, African Journal of Business Management vol. 5, no.8, 3354-3360.
Okolie, A. O., and Izedonmi, F. I. O. (2014), “The impact of audit quality on the share prices of quoted companies in Nigeria. ”, Research Journal of Finance and Accounting, vol. 5, no.8, 150-166.
Oroud, Y., A, I. M., Ahmad, T. S. T., and Ghazalat, A. (2019), “Does audit quality moderate the relationship between accounting information and the share price? Evidence from Jordan”, International Business Research, vol. 12, no.3, 58-65.
Pham, C. B. T., Vu, T. M. T., Nguyen, L. H., and Nguyen, D. D. (2020), “Audit quality and stock return co-movement: Evidence from Vietnam”, The Journal of Asian Finance, Economics, and Business, vol. 7, no.7, 139-147.
Rajgopal, S., Srinivasan, S., and Zheng, X. (2021), “Measuring audit quality”, Review of Accounting Studies, vol. 26, 559-619.
Skinner, D. J., and Srinivasan, S. (2012), “Audit quality and auditor reputation: Evidence from Japan”, The Accounting Review, vol. 87, no.5, 1737–1765.
Tahinakis, P., Mylonakis, J., and Daskalopoulou, E. (2010), “An Apprraisal of the Impact of Audit Qualifications on Firms' Stock Exchange Price
Flucturations”, Enterprise Risk Management, vol. 21, 86-99.
Tambun, S., Manurung, A. H., Murwaningsari, E., and Mayangsari, S. (2018), “The effect of audit quality on the accuracy of stock price prediction through earnings quality, evidence from Indonesia”, Journal of Business and Management, vol. 10, no.27, 120-131.
Thuneibat, N., and AlHalaseh, R. H. (2023), “Auditing quality between share price and liquidity regarding investor’s decision”, Journal of Governance & Regulation, vol. 12, no.1, 22-32.
Ugwunta, D. O., Ugwuanyi, B. U., and Ngwa, C. U. (2018), “Effect of audit quality on the market price of firms listed on the Nigerian stock market”, Journal of Accounting and Taxation, vol. 10, no.6, 61-70.
Wachid, F., and Yunita, D. N. (2019), “The disclosure of financial and non-financial performance via narrative communication: Islamic bank annual report”, Sebelas Maret Business Review, vol. 4, no.2, 77-92.
Wurgler, J. (2000), “Financial markets and the allocation of capital”, Journal of Financial Economics, vol. 58, no.1-2, 187-214.
Albart, N., Purnomo, H., Suherman, U., Judijanto, L., & Hermuningsih, S. (2023), "The Effects of Net Profit Margin, Debt Ratio, Total Assets Turnover, and Current Ratio on the Stock Prices of IDX 30 Companies within 2018-2022", International Journal of Science and Society, https://doi.org/10.54783/ijsoc.v5i5.907.
Abu Afifa, M., Alsufy, F., and Abdallah, A. (2020), “Direct and mediated associations among audit quality, earnings quality, and share price: The case of Jordan”, International Journal of Economics and Business Administration, vol. 8, no.3, 500-516.
Almaharmeh, M. I., Shehadeh, A. A., Iskandrani, M., and Saleh, M. H. T. (2021), “Audit quality and stock price synchronicity: Evidence from emerging stock markets”, The Journal of Asian Finance, Economics and Business, vol. 8, no.3, 833-843.
Bamahros, H. M., and Wan-Hussin, W. N. (2014), “Non-audit services, audit firm tenure and earnings management in Malaysia”, Asian Acadamy of Management Journal of Accounting & Finance, vol. 11, no.1, 145-168.
Blankley, A. I., Hurtt, D. N., and MacGregor, J. E. (2014), “The relationship between audit report lags and future restatements ”, Auditing: A Journal of Practice & Theory, vol. 33, no.2, 27-57.
Boone, J. P., Khurana, I. K., and Raman, K. K. (2010), “Do the Big 4 and the Second-tier firms provide audits of similar quality? ”, Journal of Accounting and Public Policy, vol. 29, no.4, 330-352.
Cameran, M., Francis, J. R., Marra, A., and Pettinicchio, A. (2015), “Are their adverse consequences of audit rotation? Evidence from the Italian experience”, Auditing: A Journal of Practice & Theory, vol. 34, no.1, 1-24.
Cameran, M., Prencipe, A., and Trombetta, M. (2016), “Mandatory audit firm rotation and audit quality”, European Accounting Review, vol. 25, no.1, 35-58.
Chan, K. H., Luo, V. W., and Mo, P. L. L. (2016), “Determinants and implications of long audit reporting lags: evidence from China ”, Accounting and Business Research, vol. 46, no.2, 145-166.
Chaney, P. K., Jeter, D. C., and Shivakumar, L. (2004), “Self-selection of auditors and audit pricing in private firms”, The Accounting Review, vol. 79, no.1, 51-72.
Chen, Q., Goldstein, I., and Jiang, W. (2007), “Price informativeness and investment sensitivity to stock price”, The Review of Financial Studies, vol. 20, no.3, 619-650.
Corbella, S., Florio, C., Gotti, G., and Mastrolia, S. A. (2015), “Audit firm rotation, audit fees, and audit quality: the experience of Italian public companies”, Journal of International Accounting, Auditing & Taxation, vol. 25, no.1, 46-66.
David, L. R., Soo, B. S., and M, T. G. (2009), “Audit tenure and the ability to meet or beat earnings forecasts”, Contemporary Accounting Research, vol. 26, no.2, 517-548.
DeFond, M., and Zhang, J. (2014), “A review of archival auditing research”, Journal of Accounting and Economics, vol. 58, no.2, 275-326.
Dionisijev, I., and Lazarevska, Z. B. (2021), “The audit opinion in the role of stock prices fluctuations on the Macedonian Stock Exchange
”, Financial Studies vol. 3, 29-43.
Durnev, A., R, M., Yeung, B., and Zarowin, P. (2003), “Does greater firm‐specific return variation mean more or less informed stock pricing?”, Journal of Accounting Research, vol. 41, no.5, 797-836.
Fargher, N., Lee, H., and Mande, V. (2008), “The effect of audit partner tenure on client managers accounting discretion”, Managerial Auditing Journal, vol. 23, no.2, 161-186.
Flees, R. B., and Mouselli, S. (2023), “The impact of qualified audit opinion on stock returns: an empirical study at Amman stock exchange”, Journal of Financial Reporting and Accounting, vol. 21, no.3, 633-653.
Francis, J. R., and Yu, M. D. (2009), “Big 4 office size and audit quality”, The Accounting Review, vol. 84, no.5, 1521-1552.
Hassan, S. U., and Farouk, M. A. (2014 ), “Audit Quality and Financial Performance of Quoted Cement Firms in Nigeria”, European Journal of Business and Management, vol. 6, 73-82.
Hoti, A., Ismajli, H., Ahmeti, S., and Dermaku, A. (2012), “Effects of Audit Opinion on Stock Price: The case of Croatia and Slovenia
”, EuroEconomica, vol. 31, no.2, 75-87.
Khurana, I. K., and Raman, K. (2004), “Litigation risk and the financial reporting credibility of Big 4 versus non-Big 4 audits: Evidence from Anglo-American countries”, The Accounting Review, vol. 79, no.2, 473-495.
Kim, J. B., Chung, R., and Firth, M. (2003), “Auditor conservatism, asymmetric monitoring, and earnings management”, Contemporary Accounting Research, vol. 20, no.2, 323-359.
Lin, J. W., and Hwang, M. I. (2010), “Audit quality, corporate governance, and earnings management: A meta‐analysis”, International Journal of Auditing, vol. 14, no.1, 57-77.
Mahdi, M., & Khaddafi, M. (2020). "The Influence of Gross Profit Margin, Operating Profit Margin and Net Profit Margin on the Stock Price of Consumer Good Industry in the Indonesia Stock Exchange on 2012-2014", International Journal of Business, Economics and Social Development , 1 (3), 153-163. https://doi.org/10.46336/ijbesd.v1i3.53.
Memis, M. U., and Cetenak, E. H. (2012), “Earnings management, audit quality, and legal environment: An international comparison”, International Journal of Economics and Financial Issues, vol. 2, no.4, 460-469.
Moradi, M., Salehi, M., Rigi, M., and Moeinizade, M. (2011), “The effect of qualified audit report on share prices and returns”, African Journal of Business Management vol. 5, no.8, 3354-3360.
Okolie, A. O., and Izedonmi, F. I. O. (2014), “The impact of audit quality on the share prices of quoted companies in Nigeria. ”, Research Journal of Finance and Accounting, vol. 5, no.8, 150-166.
Oroud, Y., A, I. M., Ahmad, T. S. T., and Ghazalat, A. (2019), “Does audit quality moderate the relationship between accounting information and the share price? Evidence from Jordan”, International Business Research, vol. 12, no.3, 58-65.
Pham, C. B. T., Vu, T. M. T., Nguyen, L. H., and Nguyen, D. D. (2020), “Audit quality and stock return co-movement: Evidence from Vietnam”, The Journal of Asian Finance, Economics, and Business, vol. 7, no.7, 139-147.
Rajgopal, S., Srinivasan, S., and Zheng, X. (2021), “Measuring audit quality”, Review of Accounting Studies, vol. 26, 559-619.
Skinner, D. J., and Srinivasan, S. (2012), “Audit quality and auditor reputation: Evidence from Japan”, The Accounting Review, vol. 87, no.5, 1737–1765.
Tahinakis, P., Mylonakis, J., and Daskalopoulou, E. (2010), “An Apprraisal of the Impact of Audit Qualifications on Firms' Stock Exchange Price
Flucturations”, Enterprise Risk Management, vol. 21, 86-99.
Tambun, S., Manurung, A. H., Murwaningsari, E., and Mayangsari, S. (2018), “The effect of audit quality on the accuracy of stock price prediction through earnings quality, evidence from Indonesia”, Journal of Business and Management, vol. 10, no.27, 120-131.
Thuneibat, N., and AlHalaseh, R. H. (2023), “Auditing quality between share price and liquidity regarding investor’s decision”, Journal of Governance & Regulation, vol. 12, no.1, 22-32.
Ugwunta, D. O., Ugwuanyi, B. U., and Ngwa, C. U. (2018), “Effect of audit quality on the market price of firms listed on the Nigerian stock market”, Journal of Accounting and Taxation, vol. 10, no.6, 61-70.
Wachid, F., and Yunita, D. N. (2019), “The disclosure of financial and non-financial performance via narrative communication: Islamic bank annual report”, Sebelas Maret Business Review, vol. 4, no.2, 77-92.
Wurgler, J. (2000), “Financial markets and the allocation of capital”, Journal of Financial Economics, vol. 58, no.1-2, 187-214.