Abstract

The mandatory rotation system for auditors was abolished after a certain period of time after it was first introduced to Korea as an accounting system advancement measure. Since the period of maintenance of the system is short, the research has not been conducted on a wide variety of subjects related to the change of the system. This study is a study on the relationship between stock price and accounting information of the mandatorily rotated companies on auditor. According to the results of this study on the value relevance between stock price at the end of March and net asset per share (BV) and earnings per share (E), net asset per share with mandatory rotation (BV․mc) could know that it was relatively low. On the other hand, the earnings per share (E․mc) of the compulsory substitute companies showed a high correlation with the share price. In addition, we tried to analyze how these results were actually received by the market. As a result of analyzing the fact that the structure of the firms that forced the auditors to rotate the KOSPI and the KOSDAQ companies was different, there was a difference in the value relevance of the mandatory auditor rotation companies according to the characteristics of the market. KOSDAQ companies had lower value of explanatory power than KOSPI firms and KOSPI firms had the same net asset value as the sample of the forced rotation companies in the KOSPI market. However, in the KOSDAQ market, forced rotation companies net asset per share (BV․mc) has significant positive (＋) value relevance. As a result of these market differences, we find that the mandatory rotation system of auditors increases value relevance in the KOSDAQ market rather than the KOSPI market. In this study, we examine how the market responds to changes in the system. It is significant that we looked at the changes in the market in response to the mandatory rotation regulations introduced into the legal system.

Keywords

• Auditing
• Mandatory Auditor Rotation
• Value Relevance
• KOSPI
• KOSDAQ.6)

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