Signing auditors’ cultural background and client investment efficiency

Fei Hou, Meina Li, Yang Xu and Song Zhou

Finance Research Letters, 2023, vol. 51, issue C

Abstract: This paper explores the effect of signing auditors’ cultural background on investment efficiency. Using a sample of Chinese listed firms between 2001 and 2019, we empirically examine the impact of signing auditors’ cultural background on client investment efficiency. We find that signing auditors with merchant guilds cultural background significantly increase investment efficiency. Moreover, the increase of client investment efficiency is partly due to improved audit quality brought about by auditors’ cultural background. Further tests show that the above relationship is more pronounced in firms with high financial constraint and high level of risk taking. This paper contributes to the literature on the effect of signing auditors’ characteristics on corporate behaviors and the long-term consequence of culture on individuals and organizations.

Keywords: Signing auditors; Cultural background; Merchant guilds culture; Client investment efficiency (search for similar items in EconPapers)
JEL-codes: G11 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:51:y:2023:i:c:s1544612322005943

DOI: 10.1016/j.frl.2022.103417

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