The Effect of Audit Quality on Firm Value: A Case in Indonesian Manufacturing Firm

Abstract

Purpose: This study aims to examine the effect of audit quality on firm value in manufacturing companies listed on the Indonesian Stock Exchange in 2013 to 2017.Design/methodology/approach: Population in this study are all manufacturing companies listed on the Indonesian Stock Exchange.Sampling was carried out using a purposive sampling method.Research data were tested using multiple regression analysis.Findings: The results from this study show that audit quality has a positive effect on firm value in manufacturing companies on the Indonesian Stock Exchange. Practical Implications:The Indonesian capital market gives a positive appreciation to companies that have higher quality audits.Higher audit quality is expected to reduce agency costs, reduce information asymmetry and increase firm value.Companies are advised to use higher quality auditors in order to increase firm value in the Indonesian capital market.Originality/value: Audit quality which is proxied by Big 4 and non-big 4 auditors has been proven to have a positive influence on firm value in manufacturing companies on the Indonesia Stock Exchange.

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