Abstract:
Econometric analysis – using panel data methods – of data on securities traded on the
Dhaka Stock Exchange, Bangladesh, over the period 199599
indicates that audit
quality may not necessarily increase with auditor size. However, choice of a large
auditor does seem to alleviate any negative impact of nonaudit
services on the
confidence of investors. A lesson from this seems to be that companies requiring a
relatively large amount of nonaudit
services from their auditor should find it
worthwhile to hire a big audit firm albeit with a fee premium. Another interesting
result is that companies declaring negative earnings do not appear to suffer any
detriment to their share returns as the link between earnings and returns is
significantly weakened when announced earnings are negative.
