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Viewing report
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Corporate Governance, Auditor Choice and Auditor
Switch. Edition No. 1
VDM Publishing House, Dec 2008, Pages: 108
The purpose of this study is to investigate the
association between firms’ internal corporate
governance mechanism and their auditor choice and
auditor switch decisions and how investors respond
to firms’ auditor choice and auditor switch
decisions in the Chinese context. The findings of
this study have theoretical and practical
implications. Different from prior studies, we find
that, in order to sustain opaqueness gains, firms
with weak internal corporate governance mechanism
and therefore high agency costs may be inclined to
avoid high-quality auditors. This study further
suggests that investors respond differently to
different types of auditor switch (i.e., switching
to a larger auditor and switching to a smaller
auditor). There are also practical implications. To
bolster the confidence of the market participants,
the regulators should carefully monitor auditing
practices to protect the interests of investors.
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