Investor sentiment, stock price, and audit quality

Abstract

Numerous studies have investigated the effect of audit quality on investors' decisions in the stock market, but the direction of most of these studies has focused solely on the rationality principle of economic factors and the documentation of the relationship between audit quality and stock price. They have rarely investigated the role of independent auditing on the emotional behaviours of investors in the stock market; hence, the main objective of this research is to investigate the moderating effect of audit quality on the relationship between investor sentiment and stock price. The results show that the auditor reports and the auditor specialisation in the industry strengthened the investors' trust in the accounting information and affected the investor sentiment in-stock pricing; however, the auditor size and the auditor tenure did not have a moderating effect and did not affect the relationship between investor sentiment and stock price.