Foreign ownership and auditor choice

Xianjie He; Oliver Meng Rui; Hongjun Zhu; Liu Zheng

doi:10.1016/j.jaccpubpol.2014.04.002

Foreign ownership and auditor choice

Xianjie He (First Author), Oliver Meng Rui (Participant Author), Hongjun Zhu (Participant Author), Liu Zheng (Participant Author)

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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.

Original language	English
Pages (from-to)	401-418
Journal	Journal of Accounting and Public Policy
Volume	33
Issue number	4
DOIs	https://doi.org/10.1016/j.jaccpubpol.2014.04.002
Publication status	Published - 2014

Corresponding author email

oliver@ceibs.edu

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AU - Zheng, Liu

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Foreign ownership and auditor choice

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