Pub Date : 2021-04-03DOI: 10.1080/21697213.2021.1980956
Honghui Zhang, Haojun Xiong, Linyi Zhang
ABSTRACT More and more Chinese-listed companies report the loss of controlling shareholders in recent years. This seems to be a boon to the Chinese capital market, which is plagued by tunnelling from controlling shareholders. Employing the absence of controlling shareholders as a novel event, this study analyzes its influence on management rent-seeking behaviour, as measured by management trading abnormal return. The results show that absence of controlling shareholders will lead to higher abnormal returns for management on share transactions. A channel analysis shows that information asymmetry and equity incentives are two moderators in the association between absence of controlling shareholders and management trading abnormal return. The results also show that the effect is less pronounced for companies with a high equity concentration and a high level of analysts following, and for companies facing a highly developed financial environment. Thus, although the type-II agency problem disappears when companies lose controlling shareholders, the type-I agency problem could be worse.
{"title":"The downside of absence of controlling shareholders: evidence from management trading abnormal return","authors":"Honghui Zhang, Haojun Xiong, Linyi Zhang","doi":"10.1080/21697213.2021.1980956","DOIUrl":"https://doi.org/10.1080/21697213.2021.1980956","url":null,"abstract":"ABSTRACT More and more Chinese-listed companies report the loss of controlling shareholders in recent years. This seems to be a boon to the Chinese capital market, which is plagued by tunnelling from controlling shareholders. Employing the absence of controlling shareholders as a novel event, this study analyzes its influence on management rent-seeking behaviour, as measured by management trading abnormal return. The results show that absence of controlling shareholders will lead to higher abnormal returns for management on share transactions. A channel analysis shows that information asymmetry and equity incentives are two moderators in the association between absence of controlling shareholders and management trading abnormal return. The results also show that the effect is less pronounced for companies with a high equity concentration and a high level of analysts following, and for companies facing a highly developed financial environment. Thus, although the type-II agency problem disappears when companies lose controlling shareholders, the type-I agency problem could be worse.","PeriodicalId":37215,"journal":{"name":"China Journal of Accounting Studies","volume":"9 1","pages":"221 - 246"},"PeriodicalIF":0.0,"publicationDate":"2021-04-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45241966","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-04-03DOI: 10.1080/21697213.2021.1992936
Yan Wang, Tao Li, Deli Wang, Kun Liu
ABSTRACT From the perspective of high-quality acquirers (with generated goodwill), this study analyses the conflicting issues in the formation, recognition and subsequent measurement of goodwill and finds that good enterprises are not willing to make a timely provision for goodwill impairment, and the reaction of investors implies a low value relevance of goodwill impairment disclosure. Further, trends in the market-to-book ratio indicate that the market has absorbed goodwill impairment information before its disclosure. This paper finds that listed companies may abuse goodwill and goodwill impairment standards by delaying the recognition and disclosure of goodwill impairment, which could lead to a sharp decline in the companies’ future performance. Overall, this study tends to provide some useful suggestions about how to disclose and refine goodwill impairment information under the current goodwill framework and offer suggestions to improve impairment testing, mergers and acquisitions (M&A) transactions, off-balance sheet information disclosure and corporate governance.
{"title":"Has damage from goodwill impairment grown in China? Analysis and response","authors":"Yan Wang, Tao Li, Deli Wang, Kun Liu","doi":"10.1080/21697213.2021.1992936","DOIUrl":"https://doi.org/10.1080/21697213.2021.1992936","url":null,"abstract":"ABSTRACT From the perspective of high-quality acquirers (with generated goodwill), this study analyses the conflicting issues in the formation, recognition and subsequent measurement of goodwill and finds that good enterprises are not willing to make a timely provision for goodwill impairment, and the reaction of investors implies a low value relevance of goodwill impairment disclosure. Further, trends in the market-to-book ratio indicate that the market has absorbed goodwill impairment information before its disclosure. This paper finds that listed companies may abuse goodwill and goodwill impairment standards by delaying the recognition and disclosure of goodwill impairment, which could lead to a sharp decline in the companies’ future performance. Overall, this study tends to provide some useful suggestions about how to disclose and refine goodwill impairment information under the current goodwill framework and offer suggestions to improve impairment testing, mergers and acquisitions (M&A) transactions, off-balance sheet information disclosure and corporate governance.","PeriodicalId":37215,"journal":{"name":"China Journal of Accounting Studies","volume":"9 1","pages":"168 - 194"},"PeriodicalIF":0.0,"publicationDate":"2021-04-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46977589","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-04-03DOI: 10.1080/21697213.2021.1992937
Bo Peng, Chen He
ABSTRACT Based on the data of firms opening stores on e-commerce platforms and DID regression model, we investigate the impacts of ‘Internet+Sales’ on management forecasts. In the view of accounting information transmission efficiency, ‘Internet+Sales’ can upgrade firms’ information technology and enhance managers’ ability to obtain earnings information, which help improve the timeliness of forecasts. However, in the view of sales uncertainty, ‘Internet+Sales’ will impact firms’ traditional sales activity and raise the difficulty for managers to estimate future earnings performance, which causes a decrease in the accuracy of forecasts. Moreover, we also find a decrease in customer concentration in these firms, and a better performance in forecast accuracy in the e-commerce platforms with less sales uncertainty policy, indicating that uncertainty can affect forecast accuracy. This paper provides specific evidence on how ‘Internet+’ affects management disclosure, and can help stakeholders have a better understanding of ‘Internet+Sales’ business model.
{"title":"Does ‘Internet+Sales’ business model help managers improve earnings forecast quality? – Based on the data of e-commerce platforms","authors":"Bo Peng, Chen He","doi":"10.1080/21697213.2021.1992937","DOIUrl":"https://doi.org/10.1080/21697213.2021.1992937","url":null,"abstract":"ABSTRACT Based on the data of firms opening stores on e-commerce platforms and DID regression model, we investigate the impacts of ‘Internet+Sales’ on management forecasts. In the view of accounting information transmission efficiency, ‘Internet+Sales’ can upgrade firms’ information technology and enhance managers’ ability to obtain earnings information, which help improve the timeliness of forecasts. However, in the view of sales uncertainty, ‘Internet+Sales’ will impact firms’ traditional sales activity and raise the difficulty for managers to estimate future earnings performance, which causes a decrease in the accuracy of forecasts. Moreover, we also find a decrease in customer concentration in these firms, and a better performance in forecast accuracy in the e-commerce platforms with less sales uncertainty policy, indicating that uncertainty can affect forecast accuracy. This paper provides specific evidence on how ‘Internet+’ affects management disclosure, and can help stakeholders have a better understanding of ‘Internet+Sales’ business model.","PeriodicalId":37215,"journal":{"name":"China Journal of Accounting Studies","volume":"9 1","pages":"268 - 288"},"PeriodicalIF":0.0,"publicationDate":"2021-04-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44182217","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-04-03DOI: 10.1080/21697213.2021.1992938
Liguang Zhang, L. Peng, Kan He
ABSTRACT Senior talents are the source and driving force of sustained economic growth, so attracting and retaining senior talents is crucial to local economic development. From the perspective of senior talents – executives, using a sample of publicly traded A-share listed companies during 2005–2018 in China, we examine the impact of air pollution on executive compensation. We find that air pollution level is significantly and positively correlated with executive compensation. This effect is more prominent for firms have less bargaining power, firms where executives have more bargaining power and executives are younger. Further studies show that air pollution inhibits the accumulation of local executive talent. Finally, adjusting executive compensation according to air pollution levels can improve future firm performance. All in all, from the perspective of listed firms’ decision makers, this paper enriches and expands the literature about economic outcomes of air pollution and further reveals the micro mechanism of air pollution negatively influencing macro economic development, providing the empirical evidence for local government policy making of talent introduction, improving the environmental governance capacity and finally promoting high quality economic development.
{"title":"Does air pollution affect executive pay?","authors":"Liguang Zhang, L. Peng, Kan He","doi":"10.1080/21697213.2021.1992938","DOIUrl":"https://doi.org/10.1080/21697213.2021.1992938","url":null,"abstract":"ABSTRACT Senior talents are the source and driving force of sustained economic growth, so attracting and retaining senior talents is crucial to local economic development. From the perspective of senior talents – executives, using a sample of publicly traded A-share listed companies during 2005–2018 in China, we examine the impact of air pollution on executive compensation. We find that air pollution level is significantly and positively correlated with executive compensation. This effect is more prominent for firms have less bargaining power, firms where executives have more bargaining power and executives are younger. Further studies show that air pollution inhibits the accumulation of local executive talent. Finally, adjusting executive compensation according to air pollution levels can improve future firm performance. All in all, from the perspective of listed firms’ decision makers, this paper enriches and expands the literature about economic outcomes of air pollution and further reveals the micro mechanism of air pollution negatively influencing macro economic development, providing the empirical evidence for local government policy making of talent introduction, improving the environmental governance capacity and finally promoting high quality economic development.","PeriodicalId":37215,"journal":{"name":"China Journal of Accounting Studies","volume":"9 1","pages":"247 - 267"},"PeriodicalIF":0.0,"publicationDate":"2021-04-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46718915","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-04-03DOI: 10.1080/21697213.2021.1980955
Shuang Xue, Pei-ji Xu
ABSTRACT In recent years, the amount of goodwill has been increased dramatically and become one of the difficult problems in academic and accounting practice. This paper focuses on the impact of goodwill on analysts’ forecasts. It is found that goodwill can increase the optimism and decrease the accuracy of analysts’ forecasts because of its low quality. Goodwill recognised initially in bull market or from the M&A without founder-chairman or founder-CEO contains more bubbles and tends to be lower quality. The more the bubbles, the larger the optimism or the errors of analysts’ forecasts. In order to exclude the alternative explanations, we also, respectively, take cross-sectional tests to control the number of analysts, the number of star analysts, and whether there is M&A in year t, and then further examine the dynamic changes between goodwill and analysts’ forecasts.
{"title":"Can analysts see through goodwill bubbles? The impact of goodwill on analysts’ forecasts","authors":"Shuang Xue, Pei-ji Xu","doi":"10.1080/21697213.2021.1980955","DOIUrl":"https://doi.org/10.1080/21697213.2021.1980955","url":null,"abstract":"ABSTRACT In recent years, the amount of goodwill has been increased dramatically and become one of the difficult problems in academic and accounting practice. This paper focuses on the impact of goodwill on analysts’ forecasts. It is found that goodwill can increase the optimism and decrease the accuracy of analysts’ forecasts because of its low quality. Goodwill recognised initially in bull market or from the M&A without founder-chairman or founder-CEO contains more bubbles and tends to be lower quality. The more the bubbles, the larger the optimism or the errors of analysts’ forecasts. In order to exclude the alternative explanations, we also, respectively, take cross-sectional tests to control the number of analysts, the number of star analysts, and whether there is M&A in year t, and then further examine the dynamic changes between goodwill and analysts’ forecasts.","PeriodicalId":37215,"journal":{"name":"China Journal of Accounting Studies","volume":"9 1","pages":"195 - 220"},"PeriodicalIF":0.0,"publicationDate":"2021-04-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44322441","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-01-02DOI: 10.1080/21697213.2021.1927770
Hongjian Wang, Song Chen
ABSTRACT Taken the cancellation of the upper limit of loan interest rates as a quasinatural experiment and based on the signal theory of auditor demand, this paper investigates how the improvement of credit availability affects the choice of auditors. Results show that, compared with low-risk enterprises, high-risk enterprises tend to choose high-quality audits because of the increased loan availability after the liberalisation of the loan interest rate ceiling, and this tendency is more pronounced in the corporations with higher financing constraints. The above results are still valid after a series of robustness tests. Further analysis reveals that high-risk companies choosing high-quality auditors do obtain more long-term loans after the loan interest rate ceiling was lifted. This study identifies the causal relationship between credit availability and auditor choice, and also provides empirical evidence for the signal function of high-quality auditors in China’s credit market.
{"title":"Credit availability, signalling and auditor choice","authors":"Hongjian Wang, Song Chen","doi":"10.1080/21697213.2021.1927770","DOIUrl":"https://doi.org/10.1080/21697213.2021.1927770","url":null,"abstract":"ABSTRACT Taken the cancellation of the upper limit of loan interest rates as a quasinatural experiment and based on the signal theory of auditor demand, this paper investigates how the improvement of credit availability affects the choice of auditors. Results show that, compared with low-risk enterprises, high-risk enterprises tend to choose high-quality audits because of the increased loan availability after the liberalisation of the loan interest rate ceiling, and this tendency is more pronounced in the corporations with higher financing constraints. The above results are still valid after a series of robustness tests. Further analysis reveals that high-risk companies choosing high-quality auditors do obtain more long-term loans after the loan interest rate ceiling was lifted. This study identifies the causal relationship between credit availability and auditor choice, and also provides empirical evidence for the signal function of high-quality auditors in China’s credit market.","PeriodicalId":37215,"journal":{"name":"China Journal of Accounting Studies","volume":"9 1","pages":"113 - 141"},"PeriodicalIF":0.0,"publicationDate":"2021-01-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1080/21697213.2021.1927770","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43303651","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-01-02DOI: 10.1080/21697213.2021.1997370
Yilin Luo Fudan, Jianqiao Hong Fudan, Chenkai Ni Fudan, Guo‐chen Wang, Yilin Luo, Jianqiao Hong, Chenkai Ni
We are pleased to announce that the annual best paper award for 2020 goes to Can individual investors identify economic links? Evidence from initial quarterly earnings announcements within industries, by Yilin Luo (Fudan University), Jianqiao Hong (Fudan University), Chenkai Ni (Fudan University) and Guochen Wang (Agricultural Bank of China). The paper was published in China Journal of Accounting Studies, Vol. 8, No. 1, 2020, pp. 121–153. In this paper, the authors examine whether individual investors in China have the ability to acquire and process the information of industry peers. They exploit the initial earnings announcement within each industry-quarter during 2015-2017 and use the frequency of investors’ daily discussions on the Xue Qiu platform to capture their information acquisition activities, and find that non-announcing firms’ investors exhibit a significant increase in their discussion frequency around the initial earnings announcement within an industry. These increased discussions facilitate the information transfer from the announcing firm to its non-announcing peers, manifested by the latter’s reactions in share prices and trading volume to the former’s unexpected earnings. In the cross-section, investors’ acquisition and processing of peer information are more pronounced when non-announcing firms exhibit a worse information environment or a stronger economic link with the announcing firm. Collectively, individual investors in China exhibit some rationality in acquiring and utilizing information of economically linked firms.
{"title":"Best paper award announcement","authors":"Yilin Luo Fudan, Jianqiao Hong Fudan, Chenkai Ni Fudan, Guo‐chen Wang, Yilin Luo, Jianqiao Hong, Chenkai Ni","doi":"10.1080/21697213.2021.1997370","DOIUrl":"https://doi.org/10.1080/21697213.2021.1997370","url":null,"abstract":"We are pleased to announce that the annual best paper award for 2020 goes to Can individual investors identify economic links? Evidence from initial quarterly earnings announcements within industries, by Yilin Luo (Fudan University), Jianqiao Hong (Fudan University), Chenkai Ni (Fudan University) and Guochen Wang (Agricultural Bank of China). The paper was published in China Journal of Accounting Studies, Vol. 8, No. 1, 2020, pp. 121–153. In this paper, the authors examine whether individual investors in China have the ability to acquire and process the information of industry peers. They exploit the initial earnings announcement within each industry-quarter during 2015-2017 and use the frequency of investors’ daily discussions on the Xue Qiu platform to capture their information acquisition activities, and find that non-announcing firms’ investors exhibit a significant increase in their discussion frequency around the initial earnings announcement within an industry. These increased discussions facilitate the information transfer from the announcing firm to its non-announcing peers, manifested by the latter’s reactions in share prices and trading volume to the former’s unexpected earnings. In the cross-section, investors’ acquisition and processing of peer information are more pronounced when non-announcing firms exhibit a worse information environment or a stronger economic link with the announcing firm. Collectively, individual investors in China exhibit some rationality in acquiring and utilizing information of economically linked firms.","PeriodicalId":37215,"journal":{"name":"China Journal of Accounting Studies","volume":"9 1","pages":"142 - 142"},"PeriodicalIF":0.0,"publicationDate":"2021-01-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43681194","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-01-02DOI: 10.1080/21697213.2021.1977892
Xuehang Yu, Junxiong Fang
ABSTRACT The increasing number of discretionary stock halts, has attracted the attention of regulatory authorities and scholars. They have also become a significant obstacle to the internationalization of China's capital market. This article systematically examines the impact of discretionary halts on the information environment from the perspective of analysts. The study finds that discretionary halts lead to a decrease in the number of analysts following, a decline in analysts' forecast accuracy, and an increase in analysts' forecast dispersion. Further research finds that reducing the amount and the decline of the quality of information disclosure are two crucial channels for discretionary stock halts deteriorating the information environment. Cross-sectional tests show that the impact of discretionary stock halts is more pronounced in samples with lower investor protection and higher agency costs. Above results indicate that the discretionary halt deteriorates the company's information environment, which provides important policy implications for China's capital market reform.
{"title":"Discretionary stock halt and analyst forecast","authors":"Xuehang Yu, Junxiong Fang","doi":"10.1080/21697213.2021.1977892","DOIUrl":"https://doi.org/10.1080/21697213.2021.1977892","url":null,"abstract":"ABSTRACT The increasing number of discretionary stock halts, has attracted the attention of regulatory authorities and scholars. They have also become a significant obstacle to the internationalization of China's capital market. This article systematically examines the impact of discretionary halts on the information environment from the perspective of analysts. The study finds that discretionary halts lead to a decrease in the number of analysts following, a decline in analysts' forecast accuracy, and an increase in analysts' forecast dispersion. Further research finds that reducing the amount and the decline of the quality of information disclosure are two crucial channels for discretionary stock halts deteriorating the information environment. Cross-sectional tests show that the impact of discretionary stock halts is more pronounced in samples with lower investor protection and higher agency costs. Above results indicate that the discretionary halt deteriorates the company's information environment, which provides important policy implications for China's capital market reform.","PeriodicalId":37215,"journal":{"name":"China Journal of Accounting Studies","volume":"9 1","pages":"24 - 53"},"PeriodicalIF":0.0,"publicationDate":"2021-01-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42500568","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-01-02DOI: 10.1080/21697213.2021.1927769
Xueyan Dong, Yijing Cui, Jingyu Gao
ABSTRACT Using data of Chinese A-share non-financial listed companies spanning years 2003–2018, we examine whether a firm’s business strategy that deviates from industry conventions influences corporate governance mechanisms, particularly the probability of choosing high-quality external auditors. We document a significantly positive correlation between a firm’s strategic deviance and high-quality auditor engagement. The exacerbation of agency conflict is an important driver for firms with strategic deviance to hire high-quality auditors. Moreover, we find evidence that hiring Big 4 auditors can curb earnings management and capital occupation of major shareholders in firms with a deviant strategy. We conclude that strategically deviant firms hire high-quality auditors due to agency conflicts.
{"title":"Strategic deviance and auditor selection","authors":"Xueyan Dong, Yijing Cui, Jingyu Gao","doi":"10.1080/21697213.2021.1927769","DOIUrl":"https://doi.org/10.1080/21697213.2021.1927769","url":null,"abstract":"ABSTRACT Using data of Chinese A-share non-financial listed companies spanning years 2003–2018, we examine whether a firm’s business strategy that deviates from industry conventions influences corporate governance mechanisms, particularly the probability of choosing high-quality external auditors. We document a significantly positive correlation between a firm’s strategic deviance and high-quality auditor engagement. The exacerbation of agency conflict is an important driver for firms with strategic deviance to hire high-quality auditors. Moreover, we find evidence that hiring Big 4 auditors can curb earnings management and capital occupation of major shareholders in firms with a deviant strategy. We conclude that strategically deviant firms hire high-quality auditors due to agency conflicts.","PeriodicalId":37215,"journal":{"name":"China Journal of Accounting Studies","volume":"9 1","pages":"81 - 112"},"PeriodicalIF":0.0,"publicationDate":"2021-01-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1080/21697213.2021.1927769","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47367891","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-01-02DOI: 10.1080/21697213.2021.1977893
Yang Han, Xi Wu, Shangkun Liang
ABSTRACT Listed companies commonly appoint their incumbent annual auditors to audit a target company during a merger and acquisition (M&A). However, some companies choose an alternative auditor to perform the M&A audit. To understand the consequences of this apparently unconventional auditor choice, we argue that the acquiring company introduces competition between the M&A auditor and the annual auditor, which makes the M&A auditor incentivised to compete for the annual audit engagement, whereas the annual auditor is motivated to protect her business from rivalry. This game facilitates corporate management to gain favourable treatment from auditors both in the annual audit and in the performance commitment attestation for post-M&A periods. Using data from Chinese M&A market from 2008 to 2017, we find evidence consistent with our hypotheses. Our findings suggest that an audit client is capable of compromising external auditors’ monitoring by employing multiple auditors on various assurance services.
{"title":"Killing two birds with one stone? Auditor choice in merger & acquisitions and subsequent auditor assurance quality","authors":"Yang Han, Xi Wu, Shangkun Liang","doi":"10.1080/21697213.2021.1977893","DOIUrl":"https://doi.org/10.1080/21697213.2021.1977893","url":null,"abstract":"ABSTRACT Listed companies commonly appoint their incumbent annual auditors to audit a target company during a merger and acquisition (M&A). However, some companies choose an alternative auditor to perform the M&A audit. To understand the consequences of this apparently unconventional auditor choice, we argue that the acquiring company introduces competition between the M&A auditor and the annual auditor, which makes the M&A auditor incentivised to compete for the annual audit engagement, whereas the annual auditor is motivated to protect her business from rivalry. This game facilitates corporate management to gain favourable treatment from auditors both in the annual audit and in the performance commitment attestation for post-M&A periods. Using data from Chinese M&A market from 2008 to 2017, we find evidence consistent with our hypotheses. Our findings suggest that an audit client is capable of compromising external auditors’ monitoring by employing multiple auditors on various assurance services.","PeriodicalId":37215,"journal":{"name":"China Journal of Accounting Studies","volume":"9 1","pages":"1 - 23"},"PeriodicalIF":0.0,"publicationDate":"2021-01-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42813861","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
京公网安备 11010802042870号
京ICP备2023020795号-1
扫码关注我们
求助内容：
应助结果提醒方式：