Disentangling stock return synchronicity from the auditor's perspective

Iftekhar Hasan, Joseph A. Micale, Qiang Wu

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

This paper investigates a firm's stock return asynchronicity through the auditor's perspective to distinguish whether this asynchronicity can proxy for the company's firm-specific information or the quality of its information environment. We find a significant and positive association between asynchronicity and audit fees after controlling for auditor quality and other factors that affect audit fees, suggesting that stock return asynchronicity is more likely to capture a company's firm-specific information than its information environment. We also find that asynchronous firms are more likely to receive adverse opinions on their internal controls over financial reporting, but are associated with lower costs of capital and auditor litigation, providing further evidence in support of the firm-specific information argument. Asynchronicity's positive association with audit fees is driven by firms with higher accounting reporting complexity, suggesting stock return asynchronicity captures a firm's complexity, resulting in more significant efforts by the auditor.

Original languageEnglish (US)
JournalJournal of Business Finance and Accounting
DOIs
StateAccepted/In press - 2023

All Science Journal Classification (ASJC) codes

  • Accounting
  • Business, Management and Accounting (miscellaneous)
  • Finance

Keywords

  • Audit fees
  • auditor
  • firm-specific information
  • idiosyncratic volatility
  • stock price informativeness
  • stock returns
  • synchronicity

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