감사품질과 이익의 질 및 기업가치에 관한 실증적 연구

This study investigates into the relation among audit quality, earning's quality, and firm value. Although prior research documents the positive association between audit quality and firm value, no research has been conducted to prove their relation theoretically or empirically. In this study, we focus on the reliability of accounting information, earnings quality to explain their relation. Earnings quality has been perceived as the core accounting information characteristic and considered as an important factor in many decisions. Earnings quality is one of the most controversial accounting topics in the practices and literature since recently many accounting irregularities has occurred. We examine the relation among audit quality, earnings quality, and firm value in an attempt to provide an explanation for the positive association between audit quality and firm value. The sample firms are selected among mainly manufacturing ones listed on the Korea Stock Exchange. Accounting data are collected from the Fn Guide provided by a financial data serving company and cover the period between 2000 and 2005. In the first phase of this study, a research hypothesis is established; audit quality is positively associated with earnings quality. A related regression model has been formulated. The dependent variable of the model is earnings quality. It is measured as accruals quality suggested by Dechow and Dichev(2002). Dechow and Dichev proposed accruals quality as a measure of earnings quality that captures the mapping of current accruals into last-period, current-period, and next-period cash flows. We use this measure to proxy the accruals quality. Accruals quality is computed as the absolute value of residuals from the cross-sectional regression of sample firms' current accruals on lagged, current, and future cash flows from operation. The larger the absolute value of residuals, the poorer the earnings quality. The independent variable of the model is audit quality measured as whether the auditors belong to Big 4 or not. Prior literature reports evidence that Big 4 provides higher audit quality than Non-Big 4. The model includes control variables such as firm size, variability of cash flows and sales, the length of operating cycle, and frequencies of loss years, suggested by Dechow and Dichev(2002). In the second phase of this study, a research hypothesis is established; earnings quality is positively associated with firm value. A related regression model has been formulated. The dependent variable of the model is firm value defined as Tobin's Q. The independent variables of the model are earnings quality and firm performance measured as return on assets(ROA) and their interaction. Various control variables are included in the model to eliminate the extraneous effects; firm size, leverage, risk, intensity of research and development costs and advertisement expenditures, growth, firm age, and controlling shareholders stock ownership. To check the robustness of study results, we conducted additional analyzes. Korea large firms tend to nominates only Big 4 and therefore firm size might lead to the positive association between audit quality and earnings quality. We conducted an additional regression analysis about only small firms to examine the relation between audit quality and earnings quality to eliminate such possible size effect. Research model concerning earnings quality and firm value is re-estimated employing market to book value of common equity and operating income to alternatively proxy the firm value and performance, respectively. Also, in order to control the endogeneity of earnings quality and firm value, the value of earnings quality estimated in the first phase is used to compute the earnings quality level of the second phase main model as an instrumental variable. This study reports the following evidence. First, earnings quality of the firms audited by Big 4 firms is higher than those audited by Non-Big 4; thus Big 4 provides higher audit quality compared with Non-Big 4. This result is different from the previous evidence that audit quality, largely measured as the discretionary accruals computed by the Jones model, is not differentiated between Big 4 and Non-Big 4 in the Korea audit market. Second, the performance of the firm with high earnings quality is more highly reflected in the market valuation. This results imply that investors tend to consider the reliability of accounting information as an important factor in the firm valuation. This evidence empirically supports the theory that the high earnings quality reduces the information risk and thus the cost of capital.