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Auditor Switching,Earnings Quality,and the Cost of Capital

Lee-Seok Hwang;Kyung-Tae Kim;Su-Keun Kwak

  This study examines the relation between auditor switching and market response.This study tests not only the direct association between auditor switching and market response,but also the effects of auditor switching on market response to earnings quality using earnings management proxied by discretionary accruals.This study also tests whether auditor size change produced by auditor switching affects on the association between auditor switching and market response.If external investors perceive auditor switching to bigger auditor(i.e.,higher audit quality) as better than auditor switching to smaller auditor(i.e.,lower audit quality),audit quality affects on the association between auditor switching and market response.……