The Effect of Audit Quality on the Valuation of Stocks in an IPO

Abstract

Price of the initial public offering stock of 80 companies listed in Tehran Stock Exchange during the 10-year period from 2003 to 2012 were studied regarding to the information of financial statements and documentary vision. Spss statistical software is utilized in order to for data analysis and the hypotheses testing. We used Kolmogorov-Smirnov test to examine data normality, linear regression model to test the research hypotheses and Pearson correlation coefficient for relationship between variables during this study.The results indicate that there is no relation between audit firm size, the type of audit opinion and amount of Explanatory Paragraphs of audit report (two audit quality elements) and the valuation of shares in an initial public offering, but there is a direct relationship between auditor specialization and quality of the information of audited financial statement (two other audit quality elements) and value of shares in initial public offerings.