Browse > Article
http://dx.doi.org/10.13106/jafeb.2020.vol7.no7.139

Audit Quality and Stock Return Co-Movement: Evidence from Vietnam  

PHAM, Chi Bich Thi (Accounting and Finance Department, National Economics University)
VU, Thu Minh Thi (School of Accounting and Auditing, National Economics University)
NGUYEN, Linh Ha (School of Accounting and Auditing, National Economics University)
NGUYEN, Dung Duc (School of Accounting and Auditing, National Economics University)
Publication Information
The Journal of Asian Finance, Economics and Business / v.7, no.7, 2020 , pp. 139-147 More about this Journal
Abstract
This paper aims to explore the relationship between the quality of the audit and the level of stock return co-movement in the context of the Vietnamese emerging market. The empirical study is designed based on the quatitative method and deductive approach. The panel dataset includes 256 listed firms from different industries,with 1115 firm-year observations on Ho Chi Minh City Stock Exchange for the period from 2014 to 2018. In the research, we built the econometric regression model, using stock return synchronicity and audit quality as the dependent and independent variable, respectively. Some control variables are also added to the econometric regression models as they are well-documented in prior research to have an effect on stock price synchronicity. To improve the accuracy of the regression coefficients, beside the Ordinary Least Squares, we employ the Random Effects Model and the Fixed Effects Model for better statistical analysis of panel data set. The results show that the quality of the audit is positively correlated to stock price synchronicity. This finding suggests that stock returns of companies with higher quality of the audit are more synchronous with the market. Results for other control variables also support our reasoning for the main findings.
Keywords
Audit Quality; Stock Return Synchronicity; Informational Environment; Firm-Specific Information; Vietnam;
Citations & Related Records
Times Cited By KSCI : 4  (Citation Analysis)
연도 인용수 순위
1 Gul, F., Kim, J., & Qiu, A. (2010). Ownership concentration, foreign shareholding, audit quality, and stock price synchronicity: Evidence from China. Journal of Financial Economics, 95(3), 425-442.https://doi.org/10.1016/j.jfineco.2009.11.005   DOI
2 Haggard, K., Martin, X., & Pereira, R. (2008). Does Voluntary Disclosure Improve Stock Price Informativeness? Financial Management, 37(4), 747-768.https://doi.org/10.1111/j.1755-053X.2008.00033.x   DOI
3 Hu, C., &Liu, S.(2013). The Implications of Low R2: Evidence from China. Emerging Markets Finance and Trade,49(1), 17-32. https://doi.org/10.2753/REE1540-496X490102   DOI
4 Hussainey, K. (2009). The impact of audit quality on earnings predictability. Managerial Auditing Journal, 24(4), 340-351. https://doi.org/10.1108/02686900910948189   DOI
5 Hutton, A.P., Marcus, A.J., Tehranian, H. (2009). Opaque financial reports, R2, and crash risk. Journal of Financial Economics,94, 67-86. [https://doi.org/10.1016/j.jfineco.2008.10.003   DOI
6 Jin, L., and Myers, S. (2006). R2 Around the World: New Theory and New Tests. Journal of Financial Economics,79, 257-292. https://doi.org/10.1016/j.jfineco.2004.11.003   DOI
7 Kelly, P. (2014). Information efficiency and firm-specific return variation.Quarterly Journal of Finance,4, 1450018. https://doi.org/10.1142/S2010139214500189   DOI
8 Kim, J.B., Chung, R.,& Firth, M. (2003). Auditor conservatism, asymmetric monitoring and earnings management. Contemporary Accounting Research, 20, 325-359. https://doi.org/10.1506/J29K-MRUA-0APP-YJ6V
9 Legoria, J., Reichelt, K.J., & Soileau, J.S. (2017). Auditors and disclosure quality: The case of major customerdisclosures. Auditing: A Journal of Practice & Theory, 37(3), 163-189. https://doi.org/10.2308/ajpt-51835   DOI
10 Fernandes, N., and Ferreira M. (2009). Insider Trading Laws and Stock Price Informativeness. The Review of Financial Studies, 22(5), 1845-887. https://doi.org/10.1093/rfs/hhn066   DOI
11 Roll, R. (1988). R2. Journal of Finance,43, 541-566. https://doi.org/10.1111/j.1540-6261.1988.tb04591.x   DOI
12 Wachid, F., & Yunita, D. (2019). The disclosure of financial and non-financial performance via narrative communication: Islamic Bank Annual Report. Sebelas Maret Business Review, 4(2), 77-92. https://doi.org/10.20961/smbr.v4i2.36042   DOI
13 Almarayeh, T., Aibar-Guzman, B., & Abdullatif, M. (2020). Does audit quality influence earningsmanagement in emerging markets? Evidence from Jordan. Revista De Contabilidad, 23(1), 64-74.https://doi.org/10.6018/rcsar.365091   DOI
14 Anh,N., Thu,V.,& Quynh,D.(2020). Corporate Governance and Stock Price Synchronicity: Empirical Evidence from Vietnam. International Journal of Financial Studies,8(2), 1-13.https://doi.org/10.3390/ijfs8020022   DOI
15 Bertrand, M., Mehta, P., & Mullainathan, S. (2002). Ferreting Out Tunneling: An Application to Indian Business Groups. The Quarterly Journal of Economics, 117(1), 121-148. https://doi.org/10.1162/003355302753399463   DOI
16 Mansi, S.A., Maxwell, W.F. and Miller, D.P. (2004). Does auditor quality and tenure matter to investors? Evidence from the bondmarket.Journal of Accounting Research, 42(4), 755-793. https://doi.org/10.1111/j.1475-679X.2004.00156.x   DOI
17 Morck, R., Yeung, B., & Yu, W. (2000). The information content of stock markets: Why do emerging markets have synchronous stock price movements?.Journal of Financial Economics, 58(1), 215-260.https://doi.org/10.1016/S0304-405X(00)00071-4   DOI
18 Ntow-Gyamfi, M., Bokpin, G., & Gemegah, A. (2015). Corporate governance and transparency: Evidence from stock return synchronicity. Journal of Financial Economic Policy, 7(2), 157-179.https://doi.org/10.1108/JFEP-10-2013-0055   DOI
19 Piotroski, J., & Roulstone, D. (2004). The Influence of Analysts, Institutional Investors, and Insiders on the Incorporation of Market, Industry, and Firm-Specific Information into Stock Prices. The Accounting Review, 79(4), 1119-1151. https://doi.org/10.2308/accr.2004.79.4.1119   DOI
20 Rahman, M. M., Meah, M. R., & Chaudhory, N. U. (2019). The Impact of Audit Characteristics on Firm Performance: An Empirical Study from an Emerging Economy. Journal of Asian Finance, Economics and Business, 6(1), 59-69.http://doi.org/10.13106/jafeb.2019.vol6.no1.59   DOI
21 Salehi, M., Moradi, M., & Paiydarmanesh, N. (2017). The effect of corporate governance and audit quality ondisclosure quality: Evidence from Tehran Stock Exchange. Periodica Polytechnica Social and Management Sciences, 25(1), 32-48. https://doi.org/10.3311/PPso.8354   DOI
22 Vo, X. (2017). Do foreign investors improve stock price informativeness in emerging equity markets? Evidence from Vietnam. Research in International Business and Finance,42, 986-991. https://doi.org/10.1016/j.ribaf.2017.07.032   DOI
23 Chan, K.,& Hameed, A. (2006). Stock price synchronicity and analyst coverage in emerging markets. Journal of Financial Economics,80(1), 115-147. https://doi.org/10.1016/j.jfineco.2005.03.010   DOI
24 Boubaker, S., Mansali, H., & Rjiba, H. (2014). Large controlling shareholders and stock price synchronicity. Journal of Banking and Finance, 40(1), 80-96.https://doi.org/10.1016/j.jbankfin.2013.11.022   DOI
25 Chae, S. J., Nakano, M., & Fujitani, R. (2020). Financial reporting opacity, audit quality and crash risk: Evidence from Japan. Journal of Asian Finance, Economics and Business, 7(1), 9-17. https://doi.org/10.13106/jafeb.2020.vol7.no1.9   DOI
26 Chan, K.,& Chan, Y.C. (2014). Price informativeness and stock return synchronicity: Evidence from the pricing of seasoned equity offerings. Journal of Financial Economics, 114(1), 36-53. https://doi.org/10.1016/j.jfineco.2014.07.002   DOI
27 Chen, K. C., & Yuan, H. (2004). Earnings management and capital resource allocation: Evidence from China's accounting-based regulation of rights issues. Accounting Review, 79(3), 645-665. https://doi.org/10.2308/accr.2004.79.3.645   DOI
28 Cohen, D., Dey, A., & Lys, T. (2008). Real and accrual-based earnings management in the pre and post-Sarbanes- Oxley periods. The Accounting Review, 83(3), 757-787. https://doi.org/10.2308/accr.2008.83.3.757   DOI
29 DeAngelo, L. (1981). Auditor size and audit quality.Journal of Accounting and Economics, 3(3),183-199.https://doi.org/10.1016/0165-4101(81)90002-1   DOI
30 Dasgupta, S., Gan, J., & Gao, N. (2010). Transparency, Price Informativeness, and Stock Return Synchronicity: Theory and Evidence. Journal of Financial and Quantitative Analysis, 45(5), 1189-1220.https://doi.org/10.1017/S0022109010000505   DOI
31 Farooq, O., &Ahmed, S. (2014). Stock Price Synchronicity and Corporate Governance Mechanisms: Evidence from an Emerging Market. International Journal of Accounting, Auditing and Performance Evaluation,10(4), 395-409. https://doi.org/10.1504/IJAAPE.2014.066392   DOI