Foreign Monitoring and Audit Quality: Evidence from Korea

Lee, Sang Cheol; Rhee, Mooweon; Yoon, Jong-chul

doi:10.3390/su10093151

Cited by 20 publications

(28 citation statements)

References 65 publications

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“…Beuselinck, Blanco and García Lara examined the role of FOOWN in enhancing the quality of accounting information and found that increases in FOOWN led to increases in the quality of financial reporting [89]. Lee, Rhee and Yoon explored the effects of both foreign majority stakeholders and foreign investors' participation on the board of directors on audit quality and establish that the presence of foreign investors such as foreign block stakeholders and foreign outside directors increased audit quality [38]. An studied how FOOWN affects the quality of financial reporting of firms listed on the Korean Stock Exchange and observed that FOOWN is positively linked with the quality of financial reporting.…”

Section: Foreign Ownershipmentioning

confidence: 99%

“…Sachs and Warner contended that FOOWN undertakes vital roles in supervising management, in same as the roles performed by large external stakeholders in emerging economies since the foreign owners have positive incentives to safeguard their capital investment [40]. The higher the number of shares managed by foreign partners, the more the foreign partner allots managerial places in the corporate to foreigners, either on the board of commissioners or a board of directors, which aim at aligning the interests of management and stakeholders to enhance the quality of financial reports [5,41,38]. All these lead to improved quality of financial reporting thereby decrease the prospect of a corporate obtaining a modified audit opinion.…”

Section: Introductionmentioning

confidence: 99%

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Impact of Ownership Characteristics on Modified Audit Opinion in Jordan

Alkilani¹,

Hussin²,

Salim³

2019

IJAFRM

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It is well established that ownership characteristics are impacted by the quality of financial reporting. The purpose of this work is to examine the role of ownership characteristics in minimising the prospect of corporates obtaining a modified audit opinion in Jordan. Three ownership characteristics [family ownership (FAOWN), institutional ownership (INOWN) and foreign ownership (FAOWN)] and modified audit opinion were studied. The study used 117 samples of corporates listed on the Amman Stock Exchange (ASE). Logistic regression was employed to analyse the association between the modified audit opinions as a dependent variable and ownership characteristics as independent variables. Ownership characteristics are anticipated to be more successful in improving the quality of financial statement, and thus, reduce the prospect of firm obtaining a modified audit opinion. The analysed results from 2012 to 2016 periods of these corporates in Jordan showed that FAOWN and FOOWN validated this projection. Interestingly, the effect of family and FOOWN improve the quality of financial statement, thereby, reduce the cases of a modified audit opinion. Additionally, the study could not find any association impact between the INOWN and modified audit opinion.

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Section: Foreign Ownershipmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Impact of Ownership Characteristics on Modified Audit Opinion in Jordan

Alkilani¹,

Hussin²,

Salim³

2019

IJAFRM

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“…This implies that earnings quality is one of the key factors associated with corporate sustainability. Therefore, from the sustainability view, prior studies have investigated earnings quality and how market participants react differently to the quality of earnings [4,5].…”

Section: Introductionmentioning

confidence: 99%

The Effect of Corporate Governance on Earnings Quality and Market Reaction to Low Quality Earnings: Korean Evidence

Shin

Kim

2018

Sustainability

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This study investigates whether corporate governance mechanisms are associated with earnings quality, especially accurate earnings reporting, and whether investors react differently to inaccurate earnings according to governance strength. Earnings accuracy is one of the key factors affecting a firm’s sustainability in the sense that reported earnings provide information about a firm’s long-term sustainability and further are directly associated with a firm’s cost of capital. In this paper, we employ the independence of the board of directors (BOD) and foreign ownership as governance mechanisms associated with the earnings gap between audited and unaudited earnings. Using 1976 non-financial firm-year observations listed on the Korea Stock Exchange from 2013 to 2016, we find that the gap between unaudited earnings and actual earnings is smaller for firms with independent BODs and foreign ownership, suggesting that earnings accuracy is higher for firms with effective corporate governance. This study also examines how investors react to the earnings gap. Stock returns to the earnings gap are less negative for firms with independent BODs and are more negative as foreign ownership increases, implying that each mechanism of corporate governance has different effects.

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“…From this perspective, auditor changes can be motivated by opportunistic incentives under ineffective governance mechanisms. Using 1574 sample firm-years of Korean data in the period of 2000-2003, Lee et al [46] report that the presence of foreign investors and outside directors is positively associated with the likelihood of choosing Big 4 auditors and paying higher audit fees. Beasley and Petroni [28] report evidence that independent boards tend to select industry specialized auditors.…”

Section: Auditor Change and Governance Mechanismmentioning

confidence: 99%

The Role of Labor Unions in Corporate Transparency: Focusing on the Role of Governance in Auditor Change Process

2019

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This study investigates how the presence and power of labor unions are associated with auditor replacement, more specifically, external auditor tenure and the direction of auditor change. External auditor tenure and direction have been of great interest to stakeholders, as they are very likely associated with the financial reporting quality and corporate transparency, crucial factors for sustainable business. We are focusing on the role of the labor union, one of the key stakeholders involved in corporate governance and transparent operations, in external auditor selection processes. During the annual wage bargaining process, labor unions that rely on financial information face information asymmetry because financial statements are provided by the management. Therefore, labor unions have a high demand for independent and capable external auditors. This demand is likely to shorten auditor tenure and/or prompt changes to higher-quality auditors. Using a sample of 4568 firm-years listed in the Korean stock markets for the period of 2005 to 2008, we find evidence that the presence and power of labor unions significantly decrease external auditor tenure. We also find that the direction of auditor changes with the presence and power of labor unions is likely from non-industry specialist auditors to industry specialist auditors. This study contributes to the extant literature by extending the previous research on auditor selection and the governance role of labor unions.

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Foreign Monitoring and Audit Quality: Evidence from Korea

Cited by 20 publications

References 65 publications

Impact of Ownership Characteristics on Modified Audit Opinion in Jordan

Impact of Ownership Characteristics on Modified Audit Opinion in Jordan

The Effect of Corporate Governance on Earnings Quality and Market Reaction to Low Quality Earnings: Korean Evidence

The Role of Labor Unions in Corporate Transparency: Focusing on the Role of Governance in Auditor Change Process

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