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1 – 2 of 2This paper aims to examine whether the cultural distance between an international audit firm and target audit clients in emerging countries is associated with auditor choice…
Abstract
Purpose
This paper aims to examine whether the cultural distance between an international audit firm and target audit clients in emerging countries is associated with auditor choice decisions.
Design/methodology/approach
Based on a sample of 104,699 firm-year observations from 20 countries over 2009–2020, logit regression analysis is used to investigate the research questions.
Findings
The authors find strong evidence that cultural distance affects the auditor selection decision. The results suggest Big N auditors are more likely to be chosen by target audit clients in emerging countries with less cultural distance. In other words, target audit clients in emerging countries prefer to choose international audit firms whose cultural characteristics are similar. Moreover, results from two-stage least squares regression further suggest that the observed effect of cultural distance on auditor choice is unlikely to be driven by potential endogeneity.
Research limitations/implications
The auditor choice is limited to companies hiring Big N auditors; the authors exclude any switches to non-Big N auditors or switches between Big N auditors. The study also suffers from the concerns about methodological and conceptual criticism that most studies about national culture have to deal with. Finally, through this paper, the authors carry out the auditor selection process from the target audit clients’ side; the authors do not discuss the supply side of the process.
Originality/value
The authors contribute to the audit choice literature by providing evidence that the cultural distance between the countries of audit firms and target audit clients plays a role in the auditor choice decision. The study complements the prior auditor choice literature, focusing primarily on Western economies, by structuring the sample scope to emerging market economies.
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Keywords
Merve G. Cevheroğlu-Açar and Cenk C. Karahan
This study empirically documents the effect of ambiguity on stock returns in a major emerging market along with the ambiguity attitudes under various market conditions.
Abstract
Purpose
This study empirically documents the effect of ambiguity on stock returns in a major emerging market along with the ambiguity attitudes under various market conditions.
Design/methodology/approach
Ambiguity is measured as the volatility of return probability distributions extracted from high frequency intraday data via a method developed by Brenner and Izhakian (2018). The impact of ambiguity is then tested on stock market returns.
Findings
The results show that ambiguity is a priced factor in Turkish stock market with a positive premium that is distinct from risk premium. In contrast with the findings in the US market, the investors in Turkey show an increasing level of ambiguity aversion as expected probability of favorable returns deviate from the mean value. The investors are effectively ambiguity neutral in lateral markets. The results are robust to testing with higher moments, sentiment measures and under recession conditions.
Originality/value
This study contributes to empirically documenting ambiguity and ambiguity aversion in a major emerging market along with the opportunity to observe international differences in ambiguity attitudes.
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