TY - JOUR
T1 - U.S. Big 4 and Local Auditors in the China Initial Public Offering Market
AU - Feng, Zhi Yuan
AU - Huang, Hua Wei
AU - Dao, Mai
PY - 2019/12/1
Y1 - 2019/12/1
N2 - 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.
AB - 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.
UR - http://www.scopus.com/inward/record.url?scp=85078433939&partnerID=8YFLogxK
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U2 - 10.1142/S0219091519500243
DO - 10.1142/S0219091519500243
M3 - Article
AN - SCOPUS:85078433939
VL - 22
JO - Review of Pacific Basin Financial Markets and Policies
JF - Review of Pacific Basin Financial Markets and Policies
SN - 0219-0915
IS - 4
M1 - 1950024
ER -