Do Auditors Respond to Media Coverage? Evidence from China

Stephen X. Gong; Ferdinand A. Gul; Liwei Shan

doi:10.2308/acch-52123

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Do Auditors Respond to Media Coverage? Evidence from China

Journal article

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Do Auditors Respond to Media Coverage? Evidence from China

Stephen X. Gong, Ferdinand A. Gul and Liwei Shan

Accounting Horizons, Vol.32(3), pp.169-194

2018

DOI: https://doi.org/10.2308/acch-52123

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Abstract

This paper examines whether news coverage of client firms is associated with their audit fees. Using data from China listed firms during 2004–2013, we find that high coverage client firms are on average charged higher audit fees, irrespective of the media tone. This positive association is stronger for large auditors than for small auditors, and for bad news than for good news. The main results hold for both state-owned enterprises (SOEs) and non-SOEs, and for both politically connected and non-connected firms. The results are robust after controlling for the effects of information asymmetry, auditor choice, internal corporate governance, and alternative measurements of the key variables. Overall, our evidence is supportive of the view that auditors assess high coverage clients as higher risk audits requiring greater audit efforts. We conclude that the financial news media plays a disciplining role in China through its potential to trigger reputational sanctions and regulatory action.

Details

Title: Do Auditors Respond to Media Coverage? Evidence from China
Authors: Stephen X. Gong (Author) - Xi’an Jiaotong-Liverpool University
Ferdinand A. Gul (Author) - Deakin University
Liwei Shan (Author) - Southwestern University of Finance and Economics
Publication details: Accounting Horizons, Vol.32(3), pp.169-194
Publisher: American Accounting Association
DOI: 10.2308/acch-52123
ISSN: 1558-7975
Organisation Unit: University of the Sunshine Coast, Queensland; School of Business and Creative Industries
Language: English
Record Identifier: 99679191502621
Output Type: Journal article

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Collaboration types: Domestic collaboration; International collaboration
Web Of Science research areas: Business, Finance

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