An Empirical Study of Chief Audit Executive Turnover: Evidence from Taiwanese Public Companies

• In Event: Continental Breakfast and Research & Education Forum
  In Roundtable Session: Table 5: Effects of Auditor Transitions

Abstract

Managers face the challenge of understanding and gauging ways of certain high impact corporate position such as Chief Audit Executive (CAE) that help drive business value and growth. This study explores the value of CAE by examining drivers that cause CAE turnover and the impact of CAE turnover on firm valuation. CAE turnover is found to be positively correlated with executive turnover and financial restatements. In addition, the results show that CAE turnover has a negative impact on contemporaneous and future firm performance. Taken together, CAE turnover could be used as an indicator of business volatility and potential business risk that may signal a troubled business or failure. Finally, we find that the passage of the governance law which is implemented to improve the quality of a firm’s internal control system is found to improve firm performance and reinforce the signaling role of CAE turnover.

Authors

• Rajiv D Banker, Temple University

• Fang-Chun Liu, Stevens Institute of Technology

• Chin-Shyh Ou, National Chung Cheng University