Foreign ownership and auditor choice

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Date: July-August 2014
From: Journal of Accounting and Public Policy(Vol. 33, Issue 4)
Publisher: Elsevier B.V.
Document Type: Article
Length: 161 words

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Abstract :

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jaccpubpol.2014.04.002 Byline: Xianjie He, Oliver Rui, Liu Zheng, Hongjun Zhu Abstract: We take advantage of the unique institutional background of the B-share stock market in China to explore the impact of foreign investors on auditor choice. Our results show that the percentage of B-share firms audited by Big 4 auditors has decreased with both economic and statistical significance since the segmented B-share market was opened to domestic investors in 2001. We find that the negative effect of opening the B-share market on demand for high audit quality is more pronounced for firms with greater decreases in foreign ownership and for firms with strong incentives to be opaque, such as those in a weak institutional environment, firms with more "other receivables," firms with more related-party transactions, and firms with political connections. Additional analysis shows that our results are not driven by the concurrent decline in capital-raising activities in the B-share market.

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Gale Document Number: GALE|A378435840