An Empirical Research on the Effect of the Abolishment of Duplicate Auditing Institution on B-Share Companies’ Governance Efficiency
|School||Shanghai Jiaotong University|
|Keywords||Duplicate auditing institution earnings management audit fees qualified audit opinion corporate governance external audit|
As the foundation of capital market, listed companies could not only influence the development of real economy but also place impact on their investors. Due to the existence of agency relationship, it is necessary to execute proper supervision on their behavior so as to protect investors as well as improve market efficiency. The governance of bureau of China established the duplicate audit institution for B-share market so as to improve information efficiency for foreign investors, because of the gap between domestic and international accounting principles. With the trend of being homogeneous for accounting principles all over the world, the mandatory duplicate audit principle has come to an end, however Chinese academic scholars have yet agreed on whether this institution is helpful in enhance corporate governance efficiency for B-share market.This paper selects listed companies in B-share market in the period from 2001 to 2009 as our research samples, meanwhile, companies from A-share market in the same era are introduced to play the role of comparison group. The abolishment of duplicate institution in 2007 is treated as the time node, this paper adopts the method of event study and use the difference-on-difference model to offer empirical test of the institutional change impact on the B-share market’s corporate efficiency. It is concluded that, in general, duplicate audit institution has shown significant corporate governance efficiency from the view of earnings management, audit fees and the probability of qualified audit opinion. This conclusion demonstrates the efficiency of external audit supervision, and may provide advice on institutional construction in China’s capital markets.