Abstract

In this study, three hypotheses are established and empirical analysis is performed to analyze the relationship between auditor change and foreign ownership. As a result of the test, it is found that auditor change has a negative relation with foreign ownership. When the auditor change is considered in detail, it is found that the downward auditor change and the same level auditor change have a negative relation with the foreign ownership. On the other hand, it is found that the auditor change does not have an additional effect on the positive relation between the reliability of accounting information and the foreign ownership. but the auditor change decreases the positive relation between the net income and the foreign ownership. This is found to be consistent even if the auditor is changed at the same level, downward level, and upward level. According to these results, it can be interpreted that the auditor's change does not improve audit quality, so domestic－foreign investors do not give additional weight to the reliability of accounting information. Rather, the auditor change is judged to increase the cost burden of the company by causing inefficiency of the audit, and it is judged that foreign investors in Korea reduce the weight given to net income. As a result, domestic－foreign investors negatively perceive the auditor change, and it is judged that there is a negative (－) relation between the auditor change and the foreign ownership. This study is expected to have policy implications in that it provides data that can predict the effectiveness of the ‘Auditor Design Rules’ system. In particular, this study is expected to have practical contributions in that it presents data that the introduction of ‘Auditor Design Rules’ can change corporate governance.

Keywords

• Auditor Change
• Foreign Ownership
• Reliability of Accounting Information
• Net Income

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