감사시장에서의 경쟁에 대한 투자자들의 반응

Worldwide regulators have great concern on the effects of audit market competition. Specifically, they are concerned that the current audit market lacks competition among auditors and the lack of competition may lead auditors to enjoy monopolistic prices while providing low quality audit service. In contrast to this view, several studies argue that intense competition leads to an improvement in audit quality. To shed light on this controversy, this study examines how stock market investors perceive the effects of audit market competition. If investors believe that audit market competition enhances (impairs) audit quality, earnings informativeness will increase (decrease) as the level of audit market competition increases. The number of auditors and the Herfindahl index are used to compute the level of audit market competition for each year and industry. To proxy for investor reaction to accounting information, we use earnings response coefficients. Empirical results using Korean data indicate that the magnitude of earnings response coefficients increases as the level of competition in the audit market increases. This finding suggests that investors perceive the low level of audit market competition to cause poor audit quality, thereby discounting the credibility of reported earnings. Our finding has important policy implications for regulators about investors’ perception of the audit market competition.