Do Big4 accounting firms affect foreign individuals’ investment decisions? Evidence from an emerging market

Purpose This paper focuses on an emerging market and investigates whether a firm’s audit engagement with a Big4 accounting firm is associated with foreign individuals’ investments. We hypothesize that Big4 accounting firms’ reputation may function as a heuristic trust signal for these investors. Design/methodology/approach We tested our hypothesis by utilizing 225 non-financial firms listed on Borsa Istanbul. The dataset covers 2005 to 2023 and contains 3,590 firm-year observations. Findings Our empirical evidence indicates that foreign individuals are more likely to invest in BIST-listed firms audited by a Big4 accounting firm (AF). Our results are consistent with prior studies showing that accounting firms’ reputation is associated with investors’ decisions. Our robustness analysis suggests that Big4 AFs’ reputation may lose importance when public governance declines. Research limitations/implications The primary limitation of this research is that investor-level data are not publicly available. We also did not incorporate audit-firm-level variables such as expertise and number of partners. Practical implications Our study has implications for managers, policymakers and accounting professionals. Managers seeking to signal trust to foreign individuals may consider the positive association between Big4 AF engagement and foreign investment. Social implications Policymakers should consider measures to enhance public governance quality to attract more foreign individuals to Borsa Istanbul. Big4 AFs should note that this reputational advantage weakens as public governance declines. Originality/value While prior studies have examined institutional investors’ and mutual funds’ preferences for Big4 accounting firms, this study contributes new archival evidence on foreign individual investors’ equity investment decisions in relation to Big4 engagement in an emerging market context.