Studying the Effect of Auditor's Characteristics and Managerial Ownership on Cash Holding Level

Cash is considered as one of the most important items of current assets in the process of firm's and profit unit's operation administration. Although the cash represented in balance sheet is considered as an important asset for the company, over-holding this asset can be a sign of lack of efficiency in resource appropriation and it incurs costs for the company. The most important factor in surplus cash holding is information asymmetry and problems resulting from that. Information asymmetry means the lack of equal information among the two parties in a contract which creates two groups of people (aware and unaware), and it affects the relationships among the beneficiaries (stockholders and investors) of the company. In fact the results of studies carried out to investigate about the effective factors in current cashes in the companies show that by increasing information asymmetry, the amount of cash held by the companies increases. On the other hand, financial reporting quality is one of the effective factors in information asymmetry and its reduction. This research is going to present some evidence regarding the role of auditor's role (tenure and auditor size) and managerial ownership because they affect financial reporting quality and following that they can affect the amount of cash held in the company. The present research is post incidental. Regarding the goal, it is an applied study and regarding data collection, it is a descriptive research. We have used two methods of library and field study in order to collect data. To study the literature and research background, we have used library method. Regarding data collection and research data, we have used Rahawar-e-Novin 3 software and the official website for the bourse. To categorize and analyze the collected data in order to approve or reject the hypotheses, we have used regression method and Excel, SPSS and Eviews software. Results of statistic test of first research hypothesis regarding the relationship between auditor's tenure and cash holding level showed that this hypothesis was approved, in a way that it has been assessed to be negative. Results of the second hypothesis in this research, regarding the effect of auditor size on cash holding have been assessed to be positive and meaningful. Results of the third research hypothesis based on the effect of managerial ownership on cash holding level showed that this hypothesis was rejected. Discussion and The findings of the first hypothesis test confirm this hypothesis stipulating the existence of an association between auditor’s tenure and the level of cash holdings, so this relationship is negative. With regard to the fact that this study is the first research to examine this relationship, it is impossible to compare the results of this hypothesis with the results of other studies. In this hypothesis, the impact of control variables such as financial leverage, firm size, cash assets, return on capital, ratio of dividends, debt maturity structure, and cash flows on level of cash holdings were also tested. The results show negative and significant impact of firm size, cash assets, debt maturity structure, and the positive impact of cash flows on level of cash holdings; that is, the result of firm size variable is consistent with results of Mehrani et al (2013 A), Ebrahimian & Fallah (2012), Resayyan et al. (2010), Fakhkhari & Taghavi(2009) and expectations of research, but it is inconsistent with the studies of Al-Najjar (2013), García-Teruel et al. (2009), Ozkan and ozkan (2004) where they found this relationship were positive. Result of cash assets variable test is consistent with results of Mehrani et al. (2013 A), Ebrahimian & Fallah (2012), Resayyan et al. (2010), Al-Najjar (2013), García-Teruel et al. (2009), Ozkan and Ozkan (2004), Ferreira & Vilela (2004) and expectations of research, but it is inconsistent with the studies of Fakhkhari & Taghavi (2009) where they found this relationship to be positive. The result of debt maturity structure variable test is consistent with the results of research of Fakhkhari & Taghavi (1388) and expectations of research but it is inconsistent with results of Mehrani et al. (2013 A), Hassas Yeghaneh et al. (2011) and Ghaemi & Alavi (2012) which they found of no significant relationship. The result of cash flows based on positive and significant impact in this study is consistent with the results of Hassas Yeghaneh et al. (2011), Fakhkhari & Taghavi (2009) and but it is inconsistent with results of Mehrani et al. (2013) and Ghaemi & Alavi (2012) where they found no significant relationship. The reason for this difference in results can be attributed to differences in population and periods of study. In fact, although the results of this study are consistent with expectations of research, some of the same studies in different courses and communities have different results that could explain the existence of effective and hidden factors in these relationships in the courses of the test. The results of the second hypothesis test, based on the impact of auditor size on level of cash holdings are appraised positive and significant. As this study is the first research to examine this relationship, it is impossible to compare the results of this hypothesis with the results of other studies. But it should be noted that the result of this test is inconsistent with the results of the theoretical literature of a negative correlation between the two variables. Due to such a conclusion, it can be stated that the audit organization, as a big auditor due to busy work and an increase in clients in recent years, lost the efficiency of quality of financial reporting and this led to increases in the level of cash holdings in companies that have been audited by this organizations. The impact of the control variables in this hypothesis were found similar to the first hypothesis, meaning that the impact of firm size, cash assets, the maturity structure of liabilities and cash flows variables on level of cash holdings is significant. The results of the third hypothesis test based on an impact of management ownership on the level of cash holdings suggest the hypothesis is rejected. This result is inconsistent with the results of Ozkan and Ozkan (2004) and the theoretical literature. The reason for this is that (considering two opposing theories in this regard) in some companies, management ownerships have a positive impact, and in other companies, they have a negative impact on the level of cash holdings; as the review of the results of all of the companies show, these offset each other. With regards to control variables, the results in this hypothesis are similar to the two previous hypotheses with which they were compared.