Department of Finance

1. Do Auditors Respond to Media Coverage? Evidence from China

Author:Gong, SX;Gul, FA;Shan, LW


Abstract:SYNOPSIS: 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.
2. Does Tenure Matter: Role of the Corporate Secretary in Chinese-Listed Firms

Author:Wang, C;Ye, Q;Goyal, A


Abstract:We study the impact of corporate secretary tenure on the governance quality of Chinese A-share listed firms. Results show that corporate secretary tenure is negatively associated with board meeting frequency, outside director in-meeting dissent, and incidence of fraud and lawsuit. Key findings are robust to an array of additional tests including propensity score matching, instrument variable analysis, as well as alternate governance measures such as analyst coverage, modified auditor opinion, number of institutional shareholders, and outside director board meeting absence. Overall, our study confirms the importance of corporate secretary in favor of modern corporate governance outcomes and board processes.
Total 2 results found
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