Review of the Relation of Auditor’s Size, Tenure & Industry Specialization with Stock Liquidity

Document Type : Original Article

Authors

10.22034/iaar.2014.104397

Abstract

The main purpose of this paper is to investigate the relationship between Auditor’s sizes, tenure and industry specialization with stock liquidity. Pervious literature shows that auditor’s size, tenure and industry specialization are correlated with audit quality and audit quality is correlated with information asymmetry and stock liquidity. So it is expected that auditor’s size, tenure and industry specialization have relationship with stock liquidity. In order to review this relation, we used the Amihud’s illiquidity measure and liquidity rank measure as dependent variables separately. The data related to independent variables (Auditor’s size, tenure and industry specialization) is gathered from audited financial statements and to calculating industry specialization; the market share approach was used. Multivariate regression method and Eviews software package was used to review the hypothesis.
Results of the review of 102 firms from1385 to 1389 (510 firm-years) show that Auditor’s size has a positive relation with stock liquidity, and if the reverse of Amihud measure was used as the dependate variable, auditor’s tenure has a positive relation with stock liquidity. Auditor’s industry specialization has no significant relation with stock liquidity, too.

Keywords

Accounting and Auditing Research
Volume 6, Issue 21
April 2014
Pages 38-51

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