External auditor type, discretionary accruals and investors’ reactions

Abdallah, Sara,(2018), External auditor type, discretionary accruals and investors’ reactions. , Journal of Accounting in Emerging Economies, UNSPECIFIED

[thumbnail of 3.pdf] Text
Restricted to Repository staff only

Download (294kB) | Request a copy


Purpose – The purpose of this paper is to investigate, in an Egyptian context, the external auditor type (Big 4 vs local) implications on reporting quality proxied by discretionary accruals (DA) and also examine whether auditor type impacts the market’s pricing of DA, where pricing is considered a proxy for the perceived DA quality. Design/methodology/approach – The sample period is 2012–2015, that is meant to be post the Egyptian revolution financial crisis; all Egyptian stock exchange (EGX) listed firms (except banks and financial institutions) are considered. DA are estimated using modified Dichev and Dechow’s (2002) model (McNicholas, 2002). Ordinary least squares regression tests are used to investigate the external auditor type implications on DA level and the related EGX investors’ pricing. Findings – The findings generally show the external auditor’s minimal role in mitigating DA. Moreover, the findings reflect the EGX investors’ negligence and/or lack of confidence in regards to DA and external auditor type factors in stock pricing. Practical implications – The paper findings highlight to regulators the need for effective monitoring of audit firms earnings management mitigation performance to help reinforce investor confidence in financial reporting quality. Originality/value – This paper is the first that investigates the external auditor monitoring mechanism implications on investors’ perceptions of earnings quality in Egypt. The paper findings would provide important contributions, particularly post the Egyptian revolution crisis, where the EGX market is trying to restore the investors’ confidence.
Keywords : External auditor, Discretionary accruals, EGX market, Investors’ pricing, UNSPECIFIED
Journal or Publication Title: Journal of Accounting in Emerging Economies
Volume: 8
Number: 3
Item Type: Article
Subjects: Akuntansi
Depositing User: Eriana Ringgowati
Date Deposited: 26 Dec 2019 07:33
Last Modified: 26 Dec 2019 07:33
URI: https://repofeb.undip.ac.id/id/eprint/898

Actions (login required)

View Item
View Item