Cash Asset Management and Audit Quality

  • 溫 宜潔

Student thesis: Doctoral Thesis

Abstract

According to the theoretical concepts for tunneling behaviors and free-cash-flow agency problems the entrenched managers may engage in value-destroying activities through the accessibility and discretion of cash holdings Thus it is extremely important to monitor the efficient use of cash assets and to understand the impact of cash holdings on firm value This study examines the effect of different audit quality or characteristics on the marginal value of cash assets for U S publicly traded firms during the period from 1991 to 2010 Not only does the efficiency of cash asset management reflect firm value through internal governance process but it may also affect market value through external monitoring function Higher audit quality provides more credible financial information and enhances the assurance value of the audit The empirical results find that the marginal value of cash assets is higher for firms with Big 4 auditors than firms with non-Big4 or only Second-tier auditors Moreover firms with industry specialist auditors exhibit a greater premium for an extra dollar of cash assets compared to non-specialist auditors The conclusions hold after performing propensity score matching to alleviate the endogenity of auditor selection and are robust after controlling for the post-SOX period auditor switches and corporate governance This evidence suggests that the efficiency of cash asset management and the reduction of agency costs can contribute to firm value through higher quality audits Thus external auditors also serve as the financial gatekeepers of firms’ cash assets
Date of Award2015 Jul 29
Original languageEnglish
SupervisorPing-Hsun Huang (Supervisor)

Cite this

Cash Asset Management and Audit Quality
宜潔, 溫. (Author). 2015 Jul 29

Student thesis: Doctoral Thesis