기업의 수명주기가 고품질 감사인 선임에 미치는 영향

This study investigates the effect of corporate life cycles on auditor selection decisions. Prior literature argue that auditor selection decisions are affected by conflict of interests among managers and shareholders. The main reason for managers to hire high quality auditors is to mitigate those conflicts by disclosing reliable financial statements. In an accounting perspective, previous studies find that accounting numbers are related to corporate life cycles. By following these studies, this study designs corporate life cycles with sales growth, tangible and intangible asset growth rate, market-to-book rate, employee growth rate, and retained earnings. All firms are divided into five different cycles, and two intermediate cycles are excluded to reduce overlapping effects. Thus, remaining cycles are growth, maturity, and decline stage. To measure high quality auditors, I use Big N auditor as well as industry specialist auditors. Big N auditors are known as high quality auditors because they have incentive to retain their reputation. Specialist auditors also provide high quality audit services based on their deep knowledge of particular industry. Specialist auditors are defined by using market shares which are calculated by client firms’ total assets. By using 7,902 firm-years in Korean stock market, this study finds that client firms hire a high quality auditor when they are classified in the decline stage. This result is consistent in both Big and specialist auditor. In the growth stage, client firms hire big auditors, but in the case of a specialist, it is not significant. The results of this paper provide new insight into the literature of auditor hiring decisions by introducing corporate life cycles. Also, the results highlight the role of high quality auditors and provide implication to policy makers.