The relationship between audit quality and risk taking toward value creation in Indonesia

Purpose The purpose of this paper is to evaluate the effect between audit quality and risk taking on value creation. Design/methodology/approach Population under study is companies on the Jakarta Stock Exchange from 2004 to 2015. Considering the limitations, 145 companies studied in this research, w...

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Bibliographic Details
Published in:Journal of accounting in emerging economies 2019-05, Vol.9 (2), p.251-267
Main Authors: Sri, Mangesti, Solimun, Solimun
Format: Article
Language:English
Subjects:
Accounting firms
Audit committees
Audit quality
Audit risk
Auditing
Auditors
Capital markets
Decision making
Diagnostic tests
Economic models
Financial statements
Hypotheses
Investments
Investors
Management accounting
Market shares
Public sector
Qualitative research
Quality
R&D
Research & development
Risk exposure
Specialization
Stock exchanges
Stockholders
Tenure
Value creation
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Summary:Purpose The purpose of this paper is to evaluate the effect between audit quality and risk taking on value creation. Design/methodology/approach Population under study is companies on the Jakarta Stock Exchange from 2004 to 2015. Considering the limitations, 145 companies studied in this research, which made a sample containing 1,740 company-years. This study is based on the panel data and multivariate regression method. This research uses fixed and random effects to estimate the regression. In this paper, five components of audit quality, including auditor specialization, tenure, audit firm size, ownership concentration and the percentage of unbounded members of the board, are studied. Findings The results of this study indicate that among these five components as well as the risk factor, only tenure and ownership concentration have a significant effect on value creation of companies. In other words, both ownership concentration and tenure are positively effective in value creation and other variables have no significant effect on value creation. Besides, none of them could affect the risk taking on value creation. Originality/value The outcomes of the current study help audit market and capital market in developing nations.
ISSN:2042-1168
2042-1176
DOI:10.1108/JAEE-11-2017-0110