Are voluntary auditor changes relevant for the Brazilian market? An analysis based on returns and stock trading volume

Abstract

This paper explores the market and investor reaction to the announcement of Voluntary Auditors’ Changes (VACs) of Brazilian public companies between 2012 and 2019. For this, was applied the event study method on return and stock trading volume, in front of a sample of 80 VACs realized by 66 companies. The main sample was also segregated into subsamples according to the audit size and opinion issued by the replaced auditor. The results indicate that, in general, there is no market nor investors' reaction to the VACs’ announcement. In addition, we identified that many Brazilian companies did not disclose the reasons for the VACs or gave generic reasons. This finding is important because shows that institutional settings which have mandatory auditor changes in short periods, like Brazil, may reduce the surprise effect of the disclosure of VACs. This fact added to the opacity of auditor changes reasons consequently would minimize VAC relevance to the market.