U.S. Big 4 and Local Auditors in the China Initial Public Offering Market

Zhi Yuan Feng, Hua Wei Huang, Mai Dao

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)

Abstract

This paper examines (1) whether auditor type affects initial public offering (IPO) pricing; (2) whether the effect of IPO pricing is different for clients with different ownership structures. We find that (1) firms being audited by Big 4 accounting firms receive IPO premium while others being audited by local accounting firms do not; (2) Big 4 auditors receive higher audit fees than China's Top 10 or small local auditors. This paper extends the prior research (e.g., Kumar, P and N Langberg (2009). Corporate fraud and investment distortions in efficient capital markets. The RAND Journal of Economics, 40, 144-172) that reduces agency conflicts between shareholders and manager (by means of better audit quality) and also reconciles corporate misreporting and investment distortions.

Original languageEnglish
Article number1950024
JournalReview of Pacific Basin Financial Markets and Policies
Volume22
Issue number4
DOIs
Publication statusPublished - 2019 Dec 1

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

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