Document Type
Journal article
Source Publication
Journal of International Accounting Research
Publication Date
Spring 2007
Volume
6
Issue
1
First Page
19
Last Page
36
Publisher
American Accounting Association
Abstract
This study uses agency theory to test whether the demand for quality-differentiated audits by listed Chinese companies is systematically associated with changes in ownership structure, which is characterized by the dominance of government and institutional owners in a transitional economy. Our empirical test results are supportive of agency theory. Specifically, we find that a decrease of government shares and a corresponding increase of institutional shares lead to a general increase in the demand for higher-quality audits in China's stock market. However, the influence of individual shareholders on a firm's auditor-choice decisions appears insignificant. Our results suggest that in the absence of institutional features typically found in free-market economies that provide incentives for managers to supply credible accounting information via quality audits, the introduction of large institutional blockholders can be a good alternative for a transitional economy.
DOI
10.2308/jiar.2007.6.1.19
Print ISSN
15426297
E-ISSN
15588025
Publisher Statement
Copyright © 2007 American Accounting Association
Access to external full text or publisher's version may require subscription.
Full-text Version
Accepted Author Manuscript
Language
English
Recommended Citation
Chan, K. H., Lin, K. Z., & Zhang, F. (2007). On the association between changes in corporate ownership and changes in auditor quality in a transitional economy. Journal of International Accounting Research, 6(1), 19-36. doi: 10.2308/jiar.2007.6.1.19
