Audit Quality, Legal and Disclosure Environments, and Analysts' Forecast Accuracy: Some International Evidence

• Main Authors: Choi, Jong-Hag, Kang, Tony, Kwon, Young Koan, Zang, Yoonseok
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2005
• Subjects: Business Law, Public Responsibility, and Ethics; International Business; Portfolio and Security Analysis
• Online Access: https://ink.library.smu.edu.sg/soa_research/133
• Institution: Singapore Management University

In this study, we investigate the relation between the quality of external audit and earnings predictability of firms situated in different legal and disclosure environments around the world. In a sample of multinational firms cross-listed in U.S., we find that the association between audit quality and forecast accuracy is stronger in weak legal and disclosure environments than in strong legal and disclosure environments. We interpret these results as suggesting that audit service can serve as an alternative device to improve market participants’ information environment in weak legal and disclosure environments.